Ukraine state debt flat at USD 70.7 bln in September, may fall by end-15

Ukraine’s state debt was reported at USD 70.7 bln, only 0.2% more than a month ago, according to Finance Ministry data released on Nov. 2. A USD 500 mln loan from the World Bank was the key source of foreign debt growth. At the same time, internal debt was almost flat with UAH 5.0 bln attracted from the sale of state bonds for the needs of the Deposit Guarantee Fund, and the state repaid UAH 4.0 bln in debt in September. External liabilities comprise 65.8% of total public debt.

Alexander Paraschiy: By the end of the year, Ukraine should reduce its foreign debt by USD 3.0 bln with a 20% decrease in the par value of USD 15 bln in Eurobonds. The key factors that can increase the external debt could be a third IMF wire (USD 1.7 bln) and related financing from other Western partners of about USD 2.3 bln (including USD 1.0 bln from the U.S. and EUR 0.6 bln from the EU). These factors aren’t certain at the moment.

The chance that Ukraine will receive IMF money by the year end still exists but is shrinking each day, we believe. The third IMF wire has already been postponed from September, as in the initial schedule, due to the delayed drafting of the 2016 budget. Meanwhile, the Ukrainian government is not hurrying to discuss spending cuts, which look essential for reaching the committed 3.7% of GDP deficit in the 2016 budget. To make matters worse, an aggressive tax reform proposal being floated is irritating the IMF. We have no doubt that the IMF is waiting to see how the tax reform plays itself out, as well as the approval of the 2016 budget. Though at this stage, we have little grounds to believe these two key documents will be approved in parliament earlier than very late December.

Meanwhile, the chances that Ukraine will get loans from the EU and the U.S. in 2015 look higher, even though they usually are linked to the IMF’s approval of its own loans. In particular, they might close their eyes to the budget process if Ukraine demonstrates progress in other areas, such as appointing an independent anti-corruption prosecutor, bringing some tangible results in deregulation and/or fighting against corruption.

Источник: Конкорд Капитал