Ukraine intends to pass legislation allowing the government to freeze foreign debt payments while the country and its international creditors negotiate conditions for restructuring more than $20 billion in bonds, Bloomberg reported.

The proposed law, filed by the chairman of President Volodymyr Zelensky's party, aims to allow for the suspension of payments on foreign sovereign debt and state-guaranteed obligations due to a coupon payment scheduled for August 1.

The parliamentary budget committee convened Thursday morning and suggested that the measure be approved by the assembly, according to chairman Danylo Hetmantsev's message on Telegram.

The clock is ticking for Ukraine and bondholders on debt restructure, as a payment freeze agreed upon 2 years ago will soon expire.

Unless a settlement is reached or a two-year moratorium is extended by the end of this month, Ukraine will legally default on its obligations in September.

"It is necessary to introduce, for the period of transactions to change the terms of borrowing, temporary measures related to the servicing and repayment of debt obligations and a moratorium on satisfaction of creditors' claims," the bill that was released by the president's office said.

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UK urged to protect Ukraine from legal action over private debts

Campaigners are lobbying Britain's incoming Labour administration to stop Ukraine from being sued in UK courts if it fails to pay its obligations to private creditors.

Debt Justice stated that a two-year moratorium on Ukraine's debt payments was set to expire on August 1, and that action was required to shield Kiev from potential legal action from its creditors.

Ukraine is negotiating with bondholders for a 60% debt writedown on the $24 billion (£18.7 billion) owed to private creditors. Bondholders, who include major financial firms such as BlackRock, Pimco, Fidelity, and AllianceBernstein, have shown their willingness to accept a 20% loss.

Bilateral creditors, notably the United Kingdom, have agreed to prolong the suspension of debt payments until 2027, but no deal has been reached with private creditors. The assistance provided by private creditors amounts to around 12% of Ukraine's yearly national product (GDP).

Kiev is concerned that if the 1 August deadline lapses, asset managers will sell their bonds to hedge funds, who will then sue. All of Ukraine's bonds are regulated by British law, thus any legal proceedings would take place in the United Kingdom.

According to Heidi Chow, Debt Justice's executive director, Ukraine "should not have to fight off shameless bondholders" while it "resists an invasion."

“These loans were given at high interest because of the supposed risk. That risk materialized the day Russia invaded.”