Ukraine has not been able to reach an agreement with a group of bondholders over restructuring some $20 billion of international debt during formal talks, it said on Monday, raising the spectre that the war-torn country might slip into default.
An agreement with holders of international bonds that allowed Ukraine to suspend payments after Russia's invasion of the country in 2022 ends in August.
Ukraine's Finance Minister Serhiy Marchenko said talks would continue and he expected the government to reach an agreement by Aug. 1.
Still, the country's dollar-denominated eurobonds fell by as much as 1.5 cents by 0800 GMT, with near-term maturities trading at deeply distressed levels between 25 and 30 cents on the dollar.
However, the government's proposal and a counter proposal by bondholders showed large disparities between what the parties expected a restructuring to look like.
"Although Ukraine and the Ad Hoc Creditor Committee did not come to an agreement on restructuring terms during the consultation period, (they) will continue engagement and constructive discussions through their respective advisors," the government said in a statement, adding it would also continue bilateral discussions with other investors.
Marchenko said the country's economy was a "fragile balance" that hinged on consistent and substantial support from its partners. "Timely debt restructuring is a critical part of this support," he said. "Strong armies must be underpinned by strong economies to win wars."
Bondholders said the government's proposal had demanded a write down that was "significantly in excess of market expectation" which was consistent with a 20% "haircut".
The proposal would "risk substantial damage to Ukraine's future investor base and core objective of re-accessing capital markets at the earliest opportunity", they added.
Ukraine could seek to extend the payment suspension beyond August, but had wanted the more lasting solution of a full debt rework.
