The Coming Ukraine "Bailout" is Really a Bankruptcy

The government of Ukraine's finances are a mess, and they are only getting worse, as a result of  the costs of the civil war, plus the lost production it causes.

Earlier this week, International Monetary Fund  chief Christine Lagarde unveiled an expanded emergency rescue package to keep Ukraine’s war-torn economy from collapse. The fund chief said some of the $40 billion in financing would come via creditors.

But here is the kicker, as WSJ points out:

But what Ms. Lagarde failed to clarify is how much of the $40 billion in financing the IMF is assuming will come from the planned bond restructuring, or as the fund put it, “debt operations.”

In a new report, the IIF industry group says around $17.5 billion is expected from the IMF. Another $9.2 billion will come from U.S. loan guarantees, low-interest loans and grants from the World Bank, the European Bank of Reconstruction and Development and other major Western economies.

“The remainder of the package (or $13.3 billion) is envisioned to come from a PSI exercise with holders of Ukraine’s external debt,” the IIF said, referring to “private sector involvement,” market lingo for a debt-restructuring.

That's a pure and simple bankruptcy.

   -RW