For some time now, Ukraine has been struggling to reach an agreement with all its creditors. This is because it is a requirement from the International Monetary Fund for all countries that need to get financial support. George Soros, one of the wealthiest individuals in the United States, believes that the Russian aggression has affected the economy of Ukraine terribly, and this has made its debt of nineteen billion unsustainable. Although the talks to try to negotiate the debts of the country are still underway in San Francisco, George Soros says that this country deserves to be given some debt relief.
The greatest concern, however, is the fact that Ukraine lacks a recourse for bankruptcy. George Soros also states that no policy allows the sovereign borrowers to introduce a ceasefire between the borrowers and lenders, choose the debts that deserve to be reorganized and at the end of the day mediate on the negotiations between the affected parties. This means that Ukraine and all its private lenders have been left to negotiate on the best way forward.
In such a situation the country has been left with just one option in the negotiations: to threaten to default the loans unless it is given some debt relief by its debtors. On the other hand, George Soros says that the bondholders have been warning the country that if it decides to default, then there will be no people who will be interested in investing in the nation in the future.
Sovereign defaults are considered to be very costly. According to the United States billionaire, they have long lasting especially when the lenders decide that they will drag out the battle. This has been happening in the recent times, especially in Latin America and in Greece. The Hungarian-born investor, George Soros says that countries that choose to reach an agreement with its lenders is able to get back to the market in a very short duration, even when it imposes losses on the lenders. This is because the default is not what keeps the nation outside the market but the severe economic problems that forced it to default accoridng to George Soros Ukraine.
This concept was clearly understood by the former United States Treasury Secretary, Nicholas Brady. The successful secretary decided to unveil the Brady Plan in the year 1989. The unique program urged all banks in the country to accept debt relief, especially in the cases concerning the Latin American nations that were pursuing sensible reforms. Brady knew that the savvy investors in his country were going to look at the future instead of focusing in the past when considering whether to give their money to an individual country that had decided to default in the past.
At the moment, Mr. Brady works as the chairman of a successful organization known as Darby Overseas Investment, considered to be a private equity arm of the Franklin Templeton. Franklin Templeton is considered to be one of the greatest bondholders for Ukraine, and it has been pressing hard against the motion advocating for debt relief.
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