Ukraine’s Western government creditors concluded a memorandum of understanding on a planned debt service suspension on Wednesday, the group said.
The group, which includes Germany, Canada, the United States, France, Japan and the United Kingdom, said in July that it would suspend Kyiv’s debt service in a coordinated manner until the end of 2023 and potentially for another year.
“This memorandum of understanding relieves Ukraine’s liquidity pressures and allows its government to increase social, health and economic spending in response to Russia’s unjustified, unprovoked and illegal war of aggression,” the group said in a statement issued by the French Ministry of Finance.
The group called on other official bilateral creditors to also quickly reach a debt service suspension agreement with Ukraine.
With a monthly fiscal deficit of $5 billion, Ukraine is heavily dependent on foreign financing from its Western allies and multilateral lenders such as the International Monetary Fund (IMF) and the World Bank.
“Like our budget support to Ukraine, which totals $8.5 billion, the debt service deferral is one more way for the United States to support Ukraine in its fight against Russia’s brutal war,” US Treasury Secretary Janet Yellen said in a separate statement.
The Western creditor group said it welcomes the reforms Ukraine is undertaking to deal with the fallout from the war and also the agreement by bond and guarantee holders to defer debt payments for two years.
Ukraine’s private creditors in August backed its request to freeze payments on nearly $20 billion in international bonds for two years, a move that will allow the war-torn country to avoid a messy debt default.