Ukraine gross foreign debt falls 6% to USD 119 bln in 2015

Ukraine’s gross external debt fell 6.0%, or USD 7.6 bln, to USD 118.7 bln as of Jan. 1, 2016, the National Bank of Ukraine reported on March 18. The main decline occurred in 4Q15, when gross external debt fell 5.1%, or USD 6.4 bln, owing to a USD 3.0 bln haircut on sovereign Eurobonds, a USD 2.1 bln decrease in private loans and USD 1.7 bln decline in trade credits.

Alexander Paraschiy: Gross external debt contraction was stronger than we expected. Most likely, the outcome was the result of shrinking imports with subsequent decline in trade credits. We estimate that gross external debt reached 131% of GDP by the end of 2015, as compared to 135% as of Oct. 1, 2015, and 97% as of Jan. 1, 2015.

Ukraine’s foreign debt prospects in 2016 look uncertain amid the continued political crisis. Initially, we expected Ukraine would receive USD 5.8 bln loan from the IMF, EUR 1.2 bln from EU and get USD 1.0 bln from placement of Eurobonds under U.S. guarantees. However, corruption scandals and the disintegration of the coalition government has halted the inflow of loans. If a new coalition emerges, we might see gross external debt rising to USD 127 bln in 2016. But very likely, the inflow of loans will be much much lower than we initially expected.