Sovereign debt in December and full-year 2014

For the month of December 2014, total government debt (direct and guaranteed) rose only US$0.46bn to US$69.74bn in US dollar equivalent while its local currency equivalent added UAH62.67bn to UAH1,100.56bn as of end-2014, according to MoF data published yesterday. The main reason for this difference is that Ukraine's debt is denominated in different currencies, with 44.89% in USD and 38.32% in UAH. In US dollar terms, a US$0.68bn increase in government debt resulted from a US$1.57bn rise in domestic debt, while external debt declined US$0.89bn, the same as the US$0.22bn decline in guaranteed debt (including declines in domestic and external debt). At the same time, in UAH terms, only external guaranteed debt decreased, down UAH0.82bn, while all other indicators rose significantly. The USD/UAH exchange rate was the key factor in the debt dynamics assessment last month. Despite a significant increase in domestic local currency debt, its USD increase was insignificant. At the same time, changes in FX-denominated debt had a much higher impact on debt outstanding in local currency terms. The NBU's official exchange rate increased from UAH14.9693/USD at the end of November to UAH15.7686/USD at the end of December. Over the course of 2014, total government debt fell US$3.32bn in USD terms but increased nearly double that amount in UAH terms. External government debt full-year 2014 rose a significant US$2.88bn, but guaranteed debt fell US$3.28bn, including the US$1.63bn redemption of Naftogaz's Eurobonds. Meanwhile, domestic debt, denominated mostly in local currency, rose UAH204.04bn, much due to new bonds issued for Naftogaz's and banks' share capital increase. The UAH-based ratio of public debt to nominal GDP was 70.8% as of year-end, based on our assumptions on the size of the economy in 4Q still to be reported. However, calculated in a US dollar based equivalent, this ratio was 53.2% (see chart below). The difference between these two figures is due to the massive UAH devaluation that occurred in 2014.

Источник: ICU