Ukraine state debt jumps 5% m/m in December

Ukraine’s state and state-guaranteed debt rose 4.8% m/m
to USD 78.3 bln in December, the Finance Ministry reported on Jan. 25. State
domestic debt rose 5.3% m/m to USD 27.5 bln, while foreign debt increased 2.1%
m/m to USD 39.7 bln. In addition, state-guaranteed debt jumped 14.1% m/m to USD
11.1 bln.

In UAH terms, overall state debt increased 2.2% m/m as
state-guaranteed debt rose 11.3% m/m. Meanwhile, state debt in UAH terms almost
did not change as the increase of state domestic debt by 2.7% m/m was offset by
the decline of state foreign debt by 0.5% m/m.

In 2018, state and state-guaranteed debt rose 2.6% yoy
in USD terms. In particular, state foreign debt increased 3.2% yoy and state
domestic debt rose 2.4% yoy. State guaranteed debt increased 14.1% yoy.

Evgeniya Akhtyrko: The surge
in December state debt was prompted by Ukraine receiving a USD 1.38 bln loan
tranche under the 14-month IMF stand-by arrangement. In turn, that enabled the
World Bank to provide a USD 750 mln financial guarantee for the loans Ukraine
is intending to attract in 2019 from Western financial institutions.

As a third factor, MinFin intensified domestic
borrowing with the placement of local bonds (including local Eurobonds) to deal
with traditional surge of government spending in the end of the calendar year.
Meanwhile, the lower growth rate of the state debt in UAH terms is explained by
the 0.5% appreciation of the Ukrainian currency in December.

The 2018 year-end state and state-guaranteed debt of
USD 78.3 bln was close to our projection. It amounts
to 61.5% of GDP (vs. 71.8% of GDP in 2017), according to our estimate.

We project state and state-guaranteed debt will
increase to USD 80.8 bln in 2019, or around 62% of GDP.