Public debt up 5.3% in August, now at 38% of GDP

Total public debt (direct and guaranteed) rose by 5.3% or UAH 19.2 bln (USD 2.4 bln) during August and reached UAH 381 bln (USD 48 bln, or 38% of GDP), according to Finance Ministry  data released yesterday. The increase was due to domestic UAH debt accumulation, while foreign debt remained almost unchanged. Around 85% of the increase stems from the total UAH 16.4 bln in VAT Bonds issued by the end of August. The rest came from the UAH 4.7 bln net issuance of regular UAH bonds at primary auctions. Public debt will further increase due to the government’s September placement of USD 2 bln in Eurobonds. Moreover, the second USD 1.5 bln tranche from the IMF is scheduled for November while Parliament approved a UAH 7.4 bln (USD 0.9 bln) capital injection via issuance of UAH sovereign bonds. The government continues to issue regular UAH bonds and tap the local market. We foresee total public debt to be at a manageable 39%-40% of GDP by end-2010.