Chinese loan increases Ukraine state debt

Ukraine’s state debt increased 3.0% mom in December (UAH 15.0 bln), reaching UAH 516.4 bln, or 36.1% of GDP in 2012E, according to Finance Ministry data released on Jan. 25. The growth was driven by external debt, which gained nearly USD 2.1 bln (+5.9% mom). At the same time, internal debt shrunk 1.1% (UAH 2.4 bln). By the year’s end, external state debt accounted for 59.8% of the total.

Alexander Paraschiy: A USD 1.5 bln loan transfer from the Chinese Export-Import Bank was the main reason for the increase in guaranteed state debt. Ukraine’s parliament granted state guarantees on a USD 3.0 bln loan from the Chinese entity to purchase farming equipment in July 2012. In December, Ukraine received the first wire transfer on this loan. Also in December, the state investment agency Finpro arranged for a USD 550 mln Eurobond placement, also under state guarantees. As a result, the state debt exceeded our estimate (35.8% of GDP) and reached the 36.1% of GDP level as of end-2012. For 2013, we expect public debt will continue growing nominally according to the state borrowing plan, but in relative terms, it should stay close to the current mark of 36% of GDP.