Page 42 - UKRRptJun19

6.1.3 Budget dynamics - funding
Ukraine’s Finance Ministry redeemed the $1bn issue of US-guaranteed bonds issued in 2014 at 1.844% on May 16, according to the nation's Finance Ministry. Evgeniya Akhtyrko at Kyiv-based brokerage Concorde Capital wrote n a note on May 20 that this is one of Ukraine's several major repayments on foreign debt in 2019. "As we estimated earlier, this expenditure will result in gross international reserves depleting by around 5% in May," she added. Given the negative current account balance and weak FDI inflow, this loss in not likely to be replenished without receiving a new tranche loan under the Stand-By Arrangement agreed by Kyiv with the International Monetary Fund (IMF) in 2018,Akhtyrko believes. In June-December 2019, Ukraine is to repay around $900mn to the IMF. In addition, it is to redeem $700mn in Eurobonds in September. In 2018, the Fund approved a 14-month $3.9bn Stand-By Arrangement (SBA) for Ukraine. The programme replaced a $17.5bn Extended Fund Facility (EFF) agreed with Kyiv in 2015. The National Bank of Ukraine (NBU) expects to obtain from the IMF two tranches of $1.3bn each by the end of 2019. Some Kyiv-based experts believe that Ukraine would receive the second tranche under the stand-by programme this summer. The third tranche is much less likely. However, some issues have surfaced in recent months that the IMF might require addressing, Specifically, February's cancellation by Ukrainian Constitutional Court of the criminal responsibility for illicit enrichment of the country's officials, following a meeting with IMF officials this week. At the top of that, the IMF might be concerned about the risk that Ukraine President- elect Volodymyr Zelenskiy is trying to undermine the independence of Ukraine’s central bank.
The EU is dangling €500mn long-term loan before Ukraine -- contingent on the Zelenskiy government implementing key anti-corruption steps. Christian Danielsson, the EU’s director general for European Neighbourhood Policy and Enlargement, told reporters in Kyiv on May 28 these conditions are: adopting a law to fight money laundering, reforming customs and tax administration, checking electronic asset declarations, and implementing an electricity market. President Zelenskiy backs these steps, but says he needs a new parliament to implement them. One year ago, the EU approved €1bn in aid to Ukraine. In December, the first €500mn tranche was released as a loan at 1.25% per annum maturing in 2033.
The European Investment Bank (EIB) has issued a long-term low-interest loan in the amount of €200mn to the Cabinet of Ministers of Ukraine within the Early Recovery Program, Head of the EIB Representation in Ukraine Jean- Erik De Zagon has said, when opening six repaired medical facilities in Kharkiv. The funds are used to invest in the restoration of key infrastructure objects in Donetsk and Luhansk regions, as well as to ensure adequate living conditions for internally displaced persons.
6.1.4 Budget dynamics - privatization
ProZorro has auctioned off 552 state properties since July, earning $37mn for the treasury. Real estate accounted for the overwhelming majority of sales of these ‘small privatisations’. Last December, Kyiv court rulings froze privatisations of large state companies.
42 UKRAINE Country Report June 2019 www.intellinews.com