Zelensky signs law empowering Ukrainian govt to freeze payments on state debt until Oct 1, 2024

MOSCOW. Aug 1 (Interfax) - Ukrainian President Vladimir Zelensky has signed legislation authorizing the government to suspend payments on the country's foreign state debt if necessary until October 1, 2024, Ukrainian media said referring to the Verkhovna Rada's website.

The Ukrainian parliament passed the legislation on July 18 and sent it to Zelensky for signing it into law, and the document was returned with Zelensky's signature on July 31.

The document amends the Budget Code by authorizing the government to suspend payments on Ukraine's foreign state debt if necessary. Apart from that, it allows for including Ukravtodor's 2021 Eurobonds valued in aggregate at $700 million plus interest in the state debt restructuring framework.

A similar technical solution entitling the government to suspend payments on the state debt was applied in the restructuring deal in 2015, when Ukraine passed legislation on specifics of transactions with the state debt, state-guaranteed debt, and local debt in May, reached agreements with investors in principle in late August, and announced the deal's conclusion in November.

"The IMF supported this bill on the operating level, as it would enhance Ukraine's debt resilience, an obligation we undertook in the memorandum with the IMF," Roksolana Pidlasa, head of the parliamentary budget committee, said before the Rada passed the legislation.

As reported, the Ukrainian government and a special committee of owners of its Eurobond debt totaling around $23 billion agreed in principle to restructure the securities on July 22. The agreement provides for writing off 37% of the debt, with the option of reissuing 12% of the debt if the country achieves a certain GDP level in 2028. Ukraine will issue new bonds on the remainder of the debt to mature in 2029-2036, interest on which will grow gradually from 1.75% within the next few years to 7.75% by the term of maturity. The holders of securities will be remunerated 1.25% of the amount of the exchanged Eurobonds as a reward for participating in the securities exchange.

Ukraine expects to complete all negotiations with the Eurobond holders by August 1, when it is supposed to make payments on its Eurobonds in line with the 2022 restructuring terms.