Ukraine has asked its international creditors to freeze its debt payments for two years so it can use its financial resources in the war against Russia.
The request was quickly backed on July 20 by Canada, France, Germany, Japan, Britain, and the United States, which announced their coordinated suspension of debt service shortly after Ukraine made its request.
"We, the Group of Creditors of Ukraine, express solidarity with and support for Ukraine as it defends itself against Russia’s unjustified, unprovoked and illegal war of aggression," the six countries said in a statement.
U.S. Treasury Secretary Janet Yellen welcomed the decision and urged other official and private creditors to join the effort.
"I reiterate the call to all other bilateral official and private creditors to join this initiative and assist Ukraine as it defends itself from Russia's unprovoked and brutal war, which has had a devastating impact on Ukraine's people and economy, with spillover effects throughout the world," Yellen said.
It is estimated that the debt freeze could save Ukraine around $5 billion over the deferral period.
Ukrainian Finance Minister Serhiy Marchenko said earlier that the debt-suspension plan had also received "explicit indications of support" from some of the world's biggest investment funds, including BlackRock, Fidelity, Amia Capital, and Gemsstock.
Facing an estimated 35 percent to 45 percent crash in GDP this year following Moscow's invasion in February, Ukraine's Finance Ministry said on July 20 it was hoping to finalize the deferral on its roughly $20 billion of debt by August 9.
The delay comes just in time for Ukraine to put off around $1.2 billion of debt payments due at the start of September.
The government's proposal, posted on its website, said all its bond-interest payments would be deferred under the plan. To avoid what would be classed as a hard default, it also offered lenders additional interest payments once the freeze ends.
"The disruption to fiscal cash flows and increased demands on government resources caused by the war has created unprecedented liquidity pressures and debt-servicing difficulties," the ministry said.
Ukraine has estimated that the costs of the war combined with lower tax revenues has left a $5 billion-a-month fiscal shortfall. Economists calculate that pushes the annual deficit to 25 percent of GDP, compared with just 3.5 percent before the conflict.
Researchers from the Kyiv School of Economics estimate that it will take more than $100 billion to rebuild Ukraine's infrastructure.