Ukraine state debt increases 1.5% m/m in July

Ukraine’s state debt grew 1.5% m/m (USD 1.0 bln) in July to USD 69.2 bln, according to MinFin data released on August 23. The defining factor was a UAH 7.1 bln (+2.8% mom) internal debt increase. By the end of July, internal debt reached 46.7% of the state debt.

Alexander Paraschiy:  A budget revenue shortfall made the authorities go deeper into debt. In July, MinFin was very active on the local markets, raising UAH 11.5 bln for deficit funding. We anticipate the state debt to decline somewhat in August on the back of IMF redemptions (USD 920 mln in August) and relatively sluggish state borrowing observed so far (MinFin raised only UAH 1.1 bln domestically as of August 26).

In view of the weak economic performance and, subsequently, poor budget collection prospects, we expect UAH 40 bln in extra net borrowings in 2H13 with the state debt growing to 39.5% of GDP by the year end.