Ukraine attracts EUR 349 mln loan under WB guarantee

Ukraine’s Finance Ministry reported on Dec. 27 it has
received a EUR 349.3 mln loan (about USD 400 mln) from Deutsche Bank, which was
provided under the guarantee of the World Bank. The loan consists of two
tranches, a 4-year facility for EUR 53.2 mln, and a 10-year facility of EUR
296.1 mln with a grace period of 4.5 years. The ministry did not specify
interest rates on the loan, while earlier Interfax-Ukraine reported that the
cap on such a loan was set by the government at 4.9%.

Out of the total USD 750 mln in loan guarantees
offered by the World Bank (as ruled by its board on Dec. 18),
the country used half of it to secure the Deutsche Bank loan. MinFin intends to
attract another loan under the remaining part of the guarantee in 1Q19,
according to its Dec. 27 statement.

This latest loan raises Ukraine’s gross international
reserves to about USD 20.7 bln as of Dec. 27, which is the highest level of the
last five years, the National Bank boasted to Interfax-Ukraine the same day.

Alexander Paraschiy: The event
brings no surprise, as the government had earlier mentioned its intention to
attract about USD 400 mln in guaranteed loans by the end of 2018. With these
accumulated gross reserves, the government can enter the new year with
confidence, despite international debt redemptions of about USD 6 bln. But the
accumulated reserves are not enough to get smoothly through the following years
(2020 and 2021) when the debt repayment schedule will also be rather intensive.

Therefore, it’s critically important for the
government to remain level-headed and continue cooperation with IFIs in order
to secure the next IMF and EU loan tranches in 2019. As Ukraine’s experience in
2017 suggests (when it easily raised USD 3 bln from a Eurobond placement in
September), the government has a tendency to get dizzy with succcess, which has
resulted in braking reforms and politicians even questioning the need for
unpopular requirements from IFIs to secure further tranches.