Kyiv should not fight against shameless bondholders, it is fighting against an aggressor – this is the position of activists in Great Britain who defend debt justice in the world. It is gratifying that our international partners realize that it is extremely difficult for Ukraine to fight on two fronts at once – military and financial, where the pressure has increased significantly recently.
As you know, the two-year suspension of Ukraine’s debt payments should end on August 1, and all the necessary actions are being taken to protect Kyiv from the possibility of a lawsuit by creditors. But there is good news, and they came from the UK.
Activists are calling on the new Labor government to prevent lawsuits against Ukraine in British courts if the country does not pay its debts to private creditors. By and large, Ukraine’s official creditors from various countries, including Great Britain, have agreed to extend the suspension of Ukraine’s debt payments until 2027. However, no agreement was reached with private creditors to extend this term. The amount by which private creditors are ready to reduce Ukraine’s debt is about 12% of the country’s annual gross domestic product (GDP). Private lenders, which include major investment firms such as BlackRock, Pimco, Fidelity and AllianceBernstein, are willing to accept losses of 20%.
Ukrainian authorities fear that after the August 1 deadline, asset managers may sell Ukrainian bonds to hedge funds that may file lawsuits against Ukraine. At the same time, all bonds of Ukraine are governed by English law, which means that any court cases will be considered in Great Britain.
The international non-governmental organization Debt Justice, which deals with issues of global debt justice, supports our country for humanitarian reasons and strives to create an appropriate precedent that will contribute to the creation of a fairer and more responsible international financial system.
Heidi Chow, executive director of Debt Justice, states: “Ukraine is resisting invasion. It should not simultaneously fight with shameless creditors who are trying to squeeze every ounce of profit out of Ukraine.”
She explains that these loans were given to Ukraine at high interest rates because of the high risk that has become a reality since the Russian invasion, and suggests that the new British government pass legislation that would prevent creditors from suing Ukraine during wartime.
As you know, last year the Committee on International Development of the House of Commons called for the adoption of laws that would oblige private creditors to participate in debt relief programs, and the Labor Party, which was then in opposition, supported this proposal.
Debt Justice is calling on the government to change the law so that debtor countries that negotiate honestly with their creditors cannot be condemned. The organization believes that this will provide Ukraine with the necessary political and legal protection to maintain the current suspension of debt payments until creditors are ready to agree to a large-scale debt restructuring.
Researcher Patrick E. Shi u published expresses the opinion that the results of negotiations regarding Ukraine’s debt will shape not only the country’s immediate defense capability, but also long-term economic stability.
Ukraine and its debts are just one of many cases where Debt Justice seeks to provide assistance, in particular, by adjusting the legislation.
Now it is about 50 countries of the world, which suffer from debts, which together make up the biggest debt crisis in more than 30 years.
38% of their debt is owed to private creditors, 35% to international organizations like the IMF, 14% to China and 13% to other governments.
Debt Justice explains the reasons for the acute crisis situation. One is that the debt suspension scheme agreed by creditors at the start of the pandemic has ended, and the suspended debts are now due. In addition, the high exchange rate of the US dollar has increased the relative size of payments on foreign debts: they are mostly made in dollars.
Using data from the World Bank and the International Monetary Fund, the charity has produced a report that shows the urgent need for comprehensive debt relief to enable poor countries to invest in crisis response measures.
