Ukraine Skips $665 Million Payment on Growth-Linked Debt

Ukraine has announced it will not make a $665 million payment due on June 2, 2025, on GDP-linked government debt, marking its first payment default on these instruments since their creation. The moratorium on these payments, introduced in August 2024, remains in effect as Ukraine continues to negotiate restructuring terms with creditors, including hedge funds. The government removed the cross-default clause last year to ensure that defaulting on GDP warrants would not trigger defaults on other sovereign bonds, thus protecting financial stability. Ukraine's finance ministry emphasized that the moratorium is part of a broader strategy aligned with IMF program targets and aims for a fair and comprehensive restructuring that treats all creditors equitably. Despite modest economic growth in 2023 and 2024, Ukraine's economy remains below pre-war levels, complicating debt servicing. Negotiations have stalled, with Ukraine preferring to delay payments rather than rush into unfavorable restructuring agreements.