Page 40 - UKRRptJun20

The big advantage from the tax code amendments is the ability to pay taxes online, which inevitably reduces interaction with potentially corrupt state officials.
6.1.3​ Budget dynamics - funding
The Ukrainian government has revised its projected budget deficit for 2020 up from an IMF compliant 2% of GDP to a radical 7.5% of GDP ​to pay for countercyclical measures to deal with the economic shocks. The new parameters have already been agreed with the IMF, Serhiy Marchenko said in April. The revised budget also envisages the economy to shrink by 4.8% due to the coronavirus pandemic, according to the economics ministry.
In early June, the IMF executives and Board are to review the $5bn, 18-month Standby Arrangement reached at a staff level in May​. The IMF’s new Ukraine mission chief Ivanna Vladkova Hollar said in a statement on May 23 that the new deal aims to provide balance of payments and budget support and "will ensure that Ukraine is well poised to return to growth and resume broader reform efforts when the crisis ends.”
Ukraine needs to borrow this year the hryvnia equivalent of $17bn,
Minister Marchenko tells NV in a lengthy interview. He calculates Ukraine will receive about one third of that in soft loans from international financial institutions. Most of the rest will come through rolling over existing domestic debt and selling new hryvnia bonds. Although yields on Ukraine’s sovereign bonds have receded to pre-crisis levels, he said he wants to avoid placing new eurobonds during the second half of this year.
Ukraine repaid a $1bn Eurobond on May 27. Issued with US guarantees,
the 5-year bond had an annual interest rate of 1.847%, the Finance Ministry reports. Prime Minister Shmygal tells Reuters the repayment “shows that we can and are able to service external and internal debt absolutely calmly.” He said Ukraine repaid the bond without dipping into its $26.2bn in central bank reserves. While Ukraine continues to borrow on the domestic market, he said: “Today, in the current situation, there is no urgent need to go to foreign markets and borrow there, firstly because the situation is unfavourable.”
Turning to the Eurobond market this summer is the next logical step,
writes Timothy Ash, a strategist at BlueBay Asset Management. “I would be surprised if the Ministry of Finance did not use the current improvement in credit conditions to tap global markets on the back of this news.” Writing from London, he notes: “Only a month or so back, Eurobond yields had pushed close to 12%, now they are below 8% and much more palatable for the Ministry. It’s a really uncertain world -- it would be a mistake for the MOF to wait to see if yields drop back to earlier year levels of 5-6%.”
Ukraine’s parliament approved on May 13 the final version of the long-anticipated so called anti-Kolomoisky banking bill with 270 votes (out of 226 needed). The bill's adoption is the last item in Ukraine’s To Do list to initiate a new IMF loan program​. The move was welcomed by the head of the EU delegation to Ukraine, Matti Maasikas, calling it “a vital measure to protect Ukraine public finances” and to continue IMF and EU financial assistance. The ambassadors of G7 countries to Ukraine tweeted that the bill’s approval “will strengthen Ukraine’s economy and promote deeper
40​ UKRAINE Country Report​ June 2020 ​ ​www.intellinews.com