Ukraine state debt exceeds UAH 1 trln by end-2014

Ukraine’s hryvnia-denominated state debt reached UAH 1,101 bln by the end of December, an 88.3% yoy surge, according to Finance Ministry data released on Jan. 28. Internal and external debt (UAH-denominated) rose 72.1% and 103.7% respectively during the year. At the same time, USD-denominated state debt in 2014 fell 4.5% yoy to USD 69.8 bln.



The main reason for the outcome was a 12.8% drop in internal debt (denominated in USD) due to the sharp hryvnia devaluation. At the same time, external debt increased 3.3% and its share of total debt rose to 55.6% from 51.4% at the year start. The state debt has reached 71% of GDP as of the end of 2014, according to our estimates.



Alexander Paraschiy: Hryvnia devaluation was the main reason for the UAH-denominated state debt growth, though issues of domestic state bonds also contributed heavily to state debt expansion. That included support for Naftogaz (UAH 96.6 bln), the refunding of Oshchadbank (UAH 11.6 bln) and Ukreximbank (UAH 5.0 bln), support for deposit guarantee funds (UAH 10.1 bln), and VAT bonds (UAH 6.9 bln). External debt (in USD) increased relatively modestly (+USD 1.2 bln), mainly consisting of loans from the EU, the World Bank and the IMF.



The state debt will keep growing in 2015 though slower. Yet just how much is hard to predict since a lot is hanging on cooperation with IFIs and the hryvnia exchange rate. However, even under a modest hryvnia decline in 2015, a state debt increase of up to 80% of GDP looks inevitable in view of the outlined budget deficit and quasi-fiscal funding needs.



The key consequence of the swelled state debt is the risk that the Russian government will demand early repayment of a USD 3.0 bln loan that matures in late December 2015. The issue prospectus of this debt gives its holder the right to demand acceleration if Ukraine’s state and state guaranteed debt to annual GDP exceeds 60%.

With yesterday’s report, we officially received a numerator of this multiplier. As of March 11, we might officially see the whole picture (after the annual 2014 GDP figure is published) and Ukraine will most likely face the requirement of repaying the Russian loan. Hopefully, the new IMF tranche will be available by that time.

Источник: Конкорд Капитал