Page 18 - UKRRptJune18

Without new foreign currency borrowings, the National Bank of Ukraine (NBU) reserves will slid below commonly recognised safety threshold of three months of imports already by the end of 2018, according to the document.
"Continuous decline in reserves coupled with increased uncertainty on the eve of elections and unfavourable end-year foreign exchange market seasonality will likely give a rise to devaluation expectations," the authors, among which one of the most prominent Ukrainian economists, wrote.
"Pressures on the national currency will build up quickly, putting hryvnia at risk of sharp devaluation. The NBU will be forced to react with interest rate hikes, new capital and exchange controls, and other anti-crisis measures," the added.
"Would these steps be effective in preventing currency crisis or not depends on many factors, including global commodity prices," the document reads. "In any case, anti-crisis measures will dent on already weak economic growth, which will likely undermine the current pro-EU course of Ukraine and give new ammunition to pro-Russian (and populist) forces."
Moreover, the government "may appear on the brink of default even earlier", as the majority of scheduled external debt repayments are to be made from government’s coffers, not the central bank, according to the report.
The government faces $6.7bn of external debt repayments by the end of the next year. Of these, about $2bn are due before the end of 2018, while the government’s foreign currency liquidity amounted only to $1.4bn by the end of the first quarter of 2018, including funds kept in state-owned banks.
"This is sufficient to meet scheduled repayments only till August-September," the authors believe. "The government can buy foreign currency from the central bank, if it has enough hryvnia in its account. This may be an important “if” because the government’s revenue is falling behind the plan. The government may muddle through for another several months by tapping domestic dollar-denominated bonds, but will eventually find itself on a brink of default, perhaps even to official creditors such as the IMF or the US."
2.5 Ukraine attempts to enforce Stockholm $2.6bn award payment on Gazprom
Ukraine's state-owned natural gas monopoly Naftogaz has appealed Swiss courts seeking to the enforce the recovery of $2.6bn debt from Russia's giant Gazprom following the award of the Stockholm arbitration court, Naftogaz said in a statement on May 30.
A bitter conflict between Naftogaz and the Russian gas monopolist that erupted after a ruling by the Arbitration Institute of the Stockholm Chamber of Commerce, according to which Gazprom should repay to Kyiv a total of
18 UKRAINE Country Report June 2018 www.intellinews.com