Page 34 - UKRRptFeb20

In 2019 state internal borrowings amounted to UAH345.91bn ​with repayment of domestic debt for UAH261.41bn, foreign borrowing stood at UAH79.79bn with repayment of UAH83.8bn, according to the State Treasury. Additionally, UAH119.25bn was paid from the budget for servicing public debt.
According to the Ministry of Finance, the share of obligations in dollars​ in the general structure of the state debt of Ukraine last year decreased from 44% to 38.9%, in SDR (special drawing rights) from 16.6% to 13.4%, while in hryvnia it increased from 29.1% to 36.7%, in euros from 9.2% to 10.2%.
7.0​ FX
During 2019, the hryvnia appreciated 14% against the dollar. ​Prime Minister Honcharuk predicts the hryvnia will continue to strengthen in 2020. “We attribute this slight weakening of the hryvnia before the New Year to speculative demand,” he said Monday on the Today show of Ukraine 24 TV. “Traditionally, before New Year, people change dollars, buy hryvnia, in order to buy gifts, or otherwise spend money.” In the last week of December, the National Bank of Ukraine bought $1.2bn. This dollar purchase exercise succeeded in weakening the hryvnia by 2.6%, to 23.82
Despite last year’s 16.5% appreciation of the hryvnia, The Economist magazine’s latest Big Mac Index indicates that Ukraine’s currency is undervalued by 58%.​ At today’s exchange rate of 24 hryvnia to the dollar, a Big Mac costs $2.37. In the US, it is $5.57. A stronger hryvnia causes pain for managers who earn in hryvnia, but pay expenses pegged to the dollar.
According to the central bank, all major world currencies devalued against the hryvnia​: the US dollar - by 14.5% the Euro - by 16.2%; the Chinese yuan - by 15.6%; the Polish zloty - by 15.3%; the British pound by 11.8%; and the Swiss franc by 12.9%.
Trying to break the hryvnia’s rise, the central bank bought $700mn worth of foreign exchange ​in the last week of December – its largest purchase of the year. In one day, the National Bank of Ukraine bought the equivalent of 10% of all currency bought to date, raising net purchases to $7.5bn. The operation succeeded in weakening the hryvnia by three kopiyok, to the rate of 23.29 to the dollar.
Traditionally, the hryvnia weakens in the fall. ​But in 2019 , low gas prices, a bumper grain crop, migrant worker remittances of $1bn a month, and a net $4bn of foreign purchases of Ukraine government treasuries combined to demolish last summer’s predictions of a weakening hryvnia. On December 12 the official exchange is 23.60, up 16% since Jan. 11. No prominent economist predicted this year’s strengthening. Undeterred, they are trying again. Alexander Martynenko, ICU’s research head, predicts the hryvnia will peak at 22-23 by the middle of 2020, then fall to 25-25.5 by the end of the year.
In the first year of a major foreign currency liberalization, the volumes of buying and selling currency online by Ukrainian individuals were almost evenly balanced at $1bn each​, reports the central bank. On Feb. 7, a liberalization package authorized online purchases of foreign currency by individuals. On Nov. 5, the central bank cancelled the daily limit for the purchase of foreign currency. It had been the equivalent of $6,250.
34​ UKRAINE Country Report​ February 2020 ​ ​www.intellinews.com