Ukraine has a month to avoid default.

According to The Economist, Ukraine is facing a looming financial crisis, because the two-year deferral of debt service payments that the country’s creditors agreed to is about to expire. The deferrered payments amount to 15% of Ukraine’s GDP annually – these costs would become the second largest budgetary expenditure after defense. However, the moratorium ends on August 1.

The IMF wants Ukraine to agree to cancellation of a portion of the debt, but an agreement is unlikely to be reached in the time remaining. If Ukraine is forced to declare a default, it will indicate an alarming lack of faith among private investors in the West’s commitments.

Without an agreement, Ukraine has two options. One of them is to agree on extending the moratorium, as has been done with official creditors, until 2027. Another option is to declare a default. This may sound radical, but the difference in impact between these scenarios is slight. In any case, Ukraine will not be resuming payments.

Bondholders are also skeptical of Ukraine’s long-term recovery plans. In their view, the restructuring will be the first of many attempts by Ukraine’s allies to shift the financial burden of the war and the costs of reconstruction to the private sector.