Bloomberg: Ukraine plans to use Russian assets to pay off debts

The Ukrainian authorities are considering using Russian assets frozen abroad to pay off sovereign debt. Bloomberg writes about this, citing sources familiar with the discussions.

The agency notes that by early September, Ukraine will have to repay $1.4 billion of public debt, including coupon payments. At the moment, the authorities are considering several options for solving the problem, but all of them are at different stages of development. The publication notes that the International Monetary Fund (IMF) is actively involved in the development of scenarios, but the fund refused to disclose details.

Among the options that the Ukrainian authorities are considering is negotiating with holders of public debt and reviewing existing agreements regarding the issuance with maturity in September. Another option is to use the frozen Russian assets abroad as collateral for the government debt, so that the holders of the papers will receive guarantees in case direct payments are not possible. However, legal difficulties may arise with this option due to the differing approaches of the authorities of different countries to the fate of assets.

The agency notes that Ukraine's desire to find an acceptable option for working with creditors indicates the desire of the authorities to maintain good relations with investors, including for the future recovery of the country. Moreover, if Ukraine succeeds in reducing its debt burden, then it will be able to use financial support from its allies more effectively to confront Russia and restore its shattered economy.

Investors themselves are still following the events around Ukraine with concern. Government bonds with maturities and payments in September are trading at a 40% discount, indicating big concerns about the government's solvency. The European Investment Bank (EIB) estimates that the cost of rebuilding Ukraine already exceeds $1 trillion.

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