A tentative cease-fire and multibillion-dollar IMF aid package buys Ukraine time to stabilize its battered, war-torn economy.
But with high reconstruction costs and a long list of badly needed reforms, the risk of a government bond default remains high.
After more than a year of armed conflict, Ukraine has also seen its currency and economy contract sharply. Inflation is soaring, and business and consumer confidence have plummeted, according to a recent survey by the National Bank of Ukraine.
The collapse in Ukraine’s hard currency reserves has left the government with little cash to cover imports, especially critical shipments of Russian natural gas.
To keep the government afloat, the International Monetary Fund on Thursday announced a $17.5 billion aid payment. Kiev needs roughly that much just to pay this year’s debt obligations and cover the cost of imported natural gas, according to Bank of America Merrill Lynch estimates.