Page 17 - bne Magazine Apri20

bne April 2020 Companies & Markets I 17
Ukriane has also been able to raise some $5bn from foreign investors' participation on the domestic debt market that
was hooked up the Clearstream international settlement and payment system last April. There too yields have tumbled over the last year, but investors have pulled back in the last few sessions following an emerging market selloff on the last
day of February.
A deal with the International Monetary Fund (IMF) is gaining increasing significance. Agreed in principle in December, Kyiv has not been able to close the deal worth $5.5bn. The IMF has been insistant on various reforms
that the new government has yet to delieve on, chief amongst them being a new law that would prohibit the government returning a bank to a former owner if it had been nationalised. Oligarch Ihor Kolomoisky has been pressuring the government to return his bank, PrivatBank, with an onslaught of legal cases and open harrassment of senior officials at the National Bank of Ukraine (NBU), including violence and arson attacks.
Ukraine could be facing a debt crisis later this year if the IMF deal falls through. Cut off from the debt markets, the government can only finance scheduled debt payments of $5bn from its gross international reserves (GIR).
bne:FX
Reserves amount to $26.6bn (as of the beginning of March), remaining the only available source to deal with Ukraine’s external payments of around $5bn in 2020. "With evolving turmoil on the international markets, Ukraine’s chances for external borrowing are next to zero. In this situation, securing IMF financing in the nearest future is a critical necessity," Evgeniya Akhtyrko of Concorde Capital said in a note.
The sliver lining form the current sell off is Ukraine could use it to retire its GDP warrants, instruments it offered bond holds are part of a restructuring deal five years ago. The problem with the warrants is as Ukraine’s economy started to grow the potential payout to investor threatened to run into the billions of dollars. Now they are cheap again.
“Ukraine 2040s, GDP warrants hit 110 a few months back - the darling of the market, with one sell side shop suggesting a fair value of 195,” Tim Ash, Senior Sovereign Strategist at BlueBay Asset Management said in a note to clients. “ They have dropped close to 40 points since, amid concern around the cabinet reshuffle, and then global market concern. If the Ukrainian authorities wanted to stabilise sentiment around Ukraine they might like to think about buy backs - they can now retire these instruments cheaply. A buy back would have cost $3.7bn a month ago, now its down to $2.4bn.”
Kazakh tenge plunges to record low as world oil prices flounder
Kanat Shaku in Almaty
The Kazakh national currency, the tenge, sank 6.6% against the dollar in the interbank market on March 16, hitting a new all-time low of KZT434.59, according to figures from Kazakhstan’s central bank.
The tenge plunged after the central bank, the National Bank of Kazakhstan (NBK), said it would stick to a free float regime instead of supporting the currency with interventions as it promised when oil prices crashed. The national lender’s governor, Yerbolat Dosayev, said that the regulator stood prepared to intervene in the foreign exchange market and take measures to ensure market stability. The central bank announced on March 6 that it sold $557.3mn on the domestic market in February alone as it intervened to combat a spike in demand for hard currency caused by the drop in world oil prices seen at the end of February after Russia and Saudi Arabia failed to agree an OPEC+ deal on limiting crude production. The move was
comprised of $94.8mn from the central bank’s own reserves and $462.5mn from the National Fund.
By 14:20 Nur-Sultan time on March 17 the KZT was trading at 406.6 to the dollar.
“Maintaining the exchange rate at the previous levels would inevitably have led to a significant decline of the country’s gold and foreign currency reserves, [increased] dollarisation, a liquidity crisis and further deterioration of the situation in the economy,” the central bank quoted its deputy governor Aliya Moldabekova as saying in a statement on March 16.
Rate kept at 12%
The regulator kept its policy rate unchanged at 12% on March 16. It noted that there was a high risk of inflation exceed-
ing the 6% target range ceiling in 2020 due to the combined effect of the coronavirus (COVID-19) pandemic and the sharp
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