Ukraine central bank to refinance promissory notes
1 October 2013
The National Bank of Ukraine will be buying government promissory notes for refinancing, NBU Monetary Policy Department Head Olena Shcherbakova stated in an interview to the Kommersant-Ukraine newspaper on September 30. Earlier this year, Ukraine’s parliament adopted a law that allows the Cabinet to issue promissory notes to restructure its payables on VAT reimbursement and repay other budget obligations. However, the law did not stipulate the rights that note holders would have. The government has yet to issue them.
Alexander Paraschiy: This announcement means that authorities have accepted the need to underpin MinFin’s promissory notes with a hryniva emission. Indeed the key question surrounding the quasi-money – that was created to cover the record high budget deficit without extra hryvnia injections – was how it would be made attractive to the market. Now it appears that the NBU has merely replicated its traditional scheme of state bonds purchases.
The total issue of promissory notes will reach up to UAH 24 bln in 2013, according to the Ministry of Revenue and Duties. We see a high risk that the new hryvnia injections might surge up to UAH 65 bln in just the next few months in light of an anticipated UAH 40 bln in extra state bonds issues to cover the deficit
