Page 12 - UKRRptMay19

cut by former finance minister Natalie Jaresko kept debt repayments down to under $10bn a year for the last five years, as Ukraine emerged from an almost total collapse of its economy in 2015. Now those payments go up considerably to $16.1bn this year, according to JP Morgan, followed by $12.8bn in 2020, $13.8bn in 2021, $14.7bn in 2022 and $15.2bn in 2023.
It’s going to be tight, but assuming a receptive international capital market and a moderate expansion of the domestic capital market Ukraine should be able to cope with the increase. Indeed, Ukraine seems to be in luck, as after the US Federal Reserve bank made it clear it was not going to continue its tightening of monetary policy a window has opened for emerging markets bond issuers into which issuers have rushed: emerging European companies and governments have already issued a total of $27.3bn of debt in the first quarter and bond traders' appetite is not yet sated.
In April Ukraine is due to be hooked up to the Clearstream international payment and settlement system that will plug its financial market directly into the global capital market system. That means bond traders can buy and sell Ukraine’s local sovereign bonds from the comfort of their dealing desks in London and New York, without having to go through expensive local brokers.
When Russia made the same reform in 2012 it transformed the local capital market as some $20bn of foreign money flooded the market, providing an essential source of fresh capital to finance the Russian budget. Even with last year’s sell off foreign investors still hold some 30% of all the outstanding ruble denominated OFZ treasury bonds, and those have been selling like hot cakes in the last two months thanks to a return of “risk-on” sentiment amongst international investors following the signals from the Fed.
Yield hungry foreign investors have already been getting into the Ukrainian debt market, buying up the locally issued dollar-denominated sovereign Eurobonds that has allowed Kyiv to meet last year’s obligations as well as the UAH debt.
The finance ministry issued UAH8.2bn, UAH7.7bn, $13.5mn and €2.6mn worth of bonds of various maturities at its weekly auction in the second week of April. And the amount raised on the domestic market has already doubled from UAH32,755mn ($1.2bn) in 2017 to UAH65,128mn in 2018, with as much raised in the first quarter of this year, UAH33,695mn, as was raised in all of 2017. Following this trend, Ukraine’s finance ministry can raise at least $2bn a year from the domestic market and probably more.
12 UKRAINE Country Report May 2019 www.intellinews.com