Ukraine State Gas Company Declares Default... "Requesting Bailout from IMF"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Naftogaz, Ukraine's state-owned gas company, has declared a default on some of its overseas bonds. With most government funds being used for war expenses, concerns are rising that other state-owned enterprises may follow with a series of defaults, which is expected to further deepen Ukraine's economic difficulties. The Ukrainian government is reportedly planning to secure bailout funds from the International Monetary Fund (IMF) to alleviate concerns over a chain of defaults.

According to the Wall Street Journal on the 26th (local time), Naftogaz stated in a press release, "We did not receive payment approval from the government cabinet for the necessary funds to repay overseas bonds," adding, "It has become difficult to repay bonds worth $335 million (approximately 440 billion KRW)." Naftogaz also mentioned, "While we currently have the capacity to repay debts, considering the ongoing war, the government is proactively focusing on funding essential social sectors, including pensions."

Previously, Naftogaz requested Western creditors, including those in Europe, to defer debt repayments for two years in light of Russia's invasion, but it is reported that the creditors did not accept this request. This is the first default declaration by a state-owned enterprise owned by the Ukrainian government since the outbreak of the war five months ago.

As the prolonged war worsens Ukraine's financial situation, concerns are growing that other state-owned enterprises may also face a series of defaults. In fact, some state-owned companies such as Ukravtodor, Ukraine's state road construction company, and Ukrenergo, the power company, have reportedly requested a two-year payment deferral from overseas creditors.

The Ukrainian government is known to plan to secure bailout funds from the IMF within this year to resolve default concerns. Kyrylo Shevchenko, Governor of the National Bank of Ukraine, stated, "We aim to receive up to $20 billion in bailout funds from the IMF by the end of the year," adding, "We are already in discussions with the IMF regarding financial support and hope to receive assistance in the form of a Stand-By Arrangement (SBA) or Extended Fund Facility (EFF) over the next two to three years."