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The ministry stated it has no current intention to resell these securities. Ukraine's debt management strategy for 2019-2022 “includes pro-active liability management operations in order to smoothen Ukraine's state debt service profile”, the ministry wrote. Based on this strategy, the ministry might continue purchasing its debt securities, including the GDP warrants.
The economy was on course to grow by more than 3% this year until the coronacrisis hit and even before the economy slowed as a result of the lockdown no large payments were expected in the next two years.
However, then Ukrainian Prime Minister Oleksiy Honcharuk said last autumn he expected Ukraine's GDP to grow by 5% in 2020 before the crisis hit and over the next five years the government will ensure that the economy grows by "at least 40%."
Investors became m ore enthusiastic about the warrants after Ukrainian president Volodymyr Zelenskiy won a landslide victory in the April 2019 elections and promised to revamp the economy on more liberal lines as well as crushing corruption.
Ukraine’s GDP-linked securities were issued in 2015-2016 for the total nominal amount of $3.24bn in exchange for written-down Ukrainian sovereign and quasi-sovereign debt of the same size. The securities offer annual payments in May of 2021-2040 in case Ukraine’s real GDP growth two years before exceeds 3.0%.
“As payments under Ukraine’s GDP-linked securities have no upper limits for most of the period of their circulation, their price is very likely to exceed par value in the mid-term. The average market price of the securities since the beginning of the summer (the most likely period of repurchase) was 90.7% of par, and in the first half of August it was 86.7% of par, which made it efficient to repurchase them,” Alexander Paraschiy of Concorde Capital said in a note.
“The purchase is a positive signal for the holders of Ukraine’s short-term debt as it indicates MinFin has enough dollar liquidity for meeting any external debt obligations (otherwise it wouldn’t have spent up to $300mn for the warrant repurchase). This is also a good signal for the holders of GDP warrants, as it indicates MinFin is anticipating large payments under the warrants in the mid-term,” Paraschiy added.
2.4 Politics - misc
Ukraine shut its borders to foreign travelers for one month, starting August 27 at midnight. The major exceptions are: foreigners with Ukraine residence permits, diplomats, travelers in transit, students enrolling in universities, truck drivers and airline crews. The ban is designed to slow the spread of coronavirus which was at record highs of 2,000 new cases a day in August. The government also banned discos, nightclubs and concerts in ‘green’ zones.
US Secretary of State Michael Pompeo warned President Zelenskiy about “malign” Chinese investment in Ukraine, including Beijing’s efforts to acquire the Motor Sich aircraft engine maker. The warning came in a telephone call August 28 with President Zelenskiy, State spokeswoman
9 UKRAINE Country Report September 2020 www.intellinews.com
