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Ukraine said on Thursday that it had failed to reach a deal with holders of $2.6bn of its debt, in a blow to its hopes of securing a restructuring ahead of a payment deadline next month.
The country’s finance ministry said it would “consider all available options” after the failure of talks in Washington this week with holders of its so-called GDP warrants.
Last month the IMF said that “if left untreated” the warrants “constitute an important risk” for the stability of an ongoing $15.5bn bailout and Kyiv’s restructuring of more than $20bn in bonds last year.
Payouts on the warrants are tied to Ukraine’s annual economic growth, which could rebound strongly in the event of a ceasefire with Russia.
Kyiv will have to decide whether to default on a payment of close to $600mn that is due at the end of May, linked to the economy’s performance in 2023, if it is unable to reach a deal on a restructuring in time.
The GDP warrants were issued as part of a previous restructuring of Ukrainian debt in 2015 and were designed to encourage creditors to back the country by giving them a share of any upside for its economy.
However, they have become contentious in the wake of Russia’s invasion in 2022 because Kyiv — along with its western backers — is reluctant to see its money flow to private investors as the economy recovers from its wartime nadir. The warrants offer a payout to holders if Ukrainian annual growth exceeds 3 per cent, but Kyiv has argued they are outdated given the damage done to the economy by the conflict.
“The GDP warrants were designed for a world that no longer exists,” said Ukraine’s finance ministry on Thursday. “Ukraine’s modest economic growth in 2023 was not a sign of surging prosperity but a fragile rebound from a nearly 30 per cent downturn caused by Russia’s full-scale invasion.”