Page 70 - UKRRptApr24

Some members of the Monetary Policy Committee of the National Bank have not ruled out a lowering of the key policy rate to 11%–12% this year. This rate will be consistent with expected moderate inflation in the coming years and should not lead to a loss in attractiveness of hryvnia assets and unbalancing of expectations. "In the conditions of a longer preservation of security risks, the economy will need additional incentives for recovery, and a more active reduction of the discount rate will make it possible to revive lending," the NBU notes. In contrast, most committee members expect the discount rate to decrease to 13-14%. In their opinion, the scope for easing interest rate policy is limited, considering the acceleration of inflation, the persistence of high-security risks, and risks related to the rhythm and volumes of external financing. Also, plans to continue FX liberalization are an additional factor that will limit the size of the step to reduce the discount rate. A more significant reduction in the discount rate can be considered only under the condition of significant positive changes in international financial aid.
8.5 Fixed income
Ukraine is unable to pay its bond owners $4.5B, so it is starting debt restructuring negotiations. Beginning in August, Ukraine must pay Eurobond holders $4.5B to service its debt. In 2024, Ukraine is scheduled to pay $910M that will be applied to the principle and $3.61B in interest). However, this amount is impossible for the country's wartime budget, so to postpone these and other payments to external commercial creditors, Ukraine is starting the official process of restructuring its debt payments. Informally, relevant consultations have been taking place since the fall of last year, said the head of the parliamentary finance committee, Danylo Hetmantsev. He reminded observers that according to the terms of the issues, Ukraine must obtain consent from the owners who possess at least 66% of the principal amount of the total Eurobond debt that has been issuedand at least 50% of each
70 UKRAINE Country Report April 2024 www.intellinews.com