Ukraine’s public debt grows 5.1% mom in June

Ukraine’s total government debt increased by 5.1% (USD 2.1 bln) m-o-m over June to USD 43.1 bln (~33.4% of GDP), the Finance Ministry reported yesterday on its Web site. Mykyta Mykhaylychenko: The increase was due to the USD 2 bln loan from Russian VTB Bank, which is, most likely, to be repaid by year-end through resources either from the IMF or a sovereign Eurobond placement. Since the beginning of the year, total public debt (direct and guaranteed) rose by 8.2% or USD 3.3 bln. Current public debt level equals ~33.4% of GDP, only marginally above 33% as of end-2009. The subdued increase of the debt level as a percentage of GDP is explained by Ukraine’s rapid real economic recovery (est. +6.2% y-o-y in 1H10) accompanied by inflation in high single-digits (avg. 9.8% y-o-y in 1H10). By end-2010, we foresee debt staying within a manageable 40%-43% of GDP (accounting for the upcoming VAT bond issuance of UAH 16.4 bln).