Following Russia's annexation of Ukraine's Crimean region and the conflict with pro-Russian separatists in the east that has wrecked its economy, Ukraine's debt is widely expected to top 100 per cent of GDP this year.
Kiev hopes for a 40 per cent debt writedown on bonds worth a little more than $15 billion in order to make the debt sustainable.
But a group of four creditors holding around $9 billion of Ukrainian bonds, led by US asset manager Franklin Templeton, disagree that a haircut is needed and have put forward an alternative proposal for maturity extensions and coupon reductions.
The only concrete example of progress so far has been the suggestion of swapping part of Ukraine's debt for GDP-linked bonds, which both sides support, and which would offer equity-like returns if the country's economy outperforms.
So far, Ukraine has met all of its debt obligations, including a $75 million coupon payment to Russia, and has successfully negotiated maturity extensions on a number of other payments.
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However, Goldman Sachs has warned that default looks "likely" in July when a payment of $120 million comes due on a Ukrainian government bond.
Prices for the $2.6 billion bond maturing in 2017 sank below 40 cents on the dollar earlier this year as the escalating crisis encouraged investors to sell out. They have since recovered to a five-month high as investors register hope that a solution can still be found.
Vadim Khramov, an analyst at Bank of America Merrill Lynch, cautions that things are still likely to get worse in Ukraine before they get better.
"A last-minute deal in September remains a likely possibility," he wrote. "However, the consensus is that risks of a moratorium and hard default have been increasing."
The International Monetary Fund has stated that it will stand by its bailout of Ukraine even if the country fails to reach an agreement on restructuring its private debt and Kiev is now waiting for the outcome of a review before it receives the next tranche of IMF funding.
Kiev was bailed out by the IMF last year in the wake of the removal of former president Viktor Yanukovich from office and received a fresh pledge this year as conflict with Russian-backed separatists in Ukraine's eastern districts worsened.
On Friday, Ukraine marked the one year anniversary of the MH17 air disaster, in which a passenger plane was shot down by pro-Russian Ukrainian rebels in eastern Ukraine as it flew from Amsterdam to Kuala Lumpur.
"Hardly anyone can feel for the families of the victims of MH17 flight more than Ukrainians," said Ukrainian president Petro Poroshenko, reiterating the scale of destruction the country has suffered over the past year.