Ukraine state debt breaks 60% of GDP ceiling in August

Ukraine’s USD-denominated state debt increased 0.4% m/m (USD 286 mln) in August to USD 69.5 bln, according to Finance Ministry data released on Sept. 26. External debt decreased 1.8% (USD 741 mln) while internal debt grew 3.6% (USD 1 bln) through the month. In UAH-denominated terms, the state debt rose much stronger (+12.9% m/m) to reach UAH 945.8 bln, which is near 63.3% of GDP.

Alexander Paraschiy: The refunding of Naftogaz (UAH 46.7 bln) was the main reason for the August rise in state debt. A new wave of hryvnia devaluation also was responsible for UAH-denominated state debt growth. We are already above 60% of GDP but more debt accumulation is still ahead. In particular, there will be more refunding of Naftogaz (by at least UAH 16.6 bln in residuals from UAH 63.3 bln approved by the Cabinet). In September, we have already received USD 1.4 bln from the IMF and USD 0.5 bln from the World Bank.

At the same time, the state’s guaranteed debt should decrease by USD 1.6 bln in September since Naftogaz (NAFTO) is due to repay this amount tomorrow. Also we anticipate a USD 1 bln Eurobonds placement under U.S. government guarantees, though it will most likely happen later this year. In December, a USD 2.8 bln tranche should arrive from the IMF if it’s satisfied with Ukraine’s progress by November. By the end of the year, state debt should be no less than 65% of GDP, we estimate.