Ukraine state debt inches up 0.8% in March

Ukraine’s state debt increased 0.8% in March to USD 72.4 bln from USD 71.8 bln in the prior month, the Finance Ministry reported on April 27. The main reason was a state bond issue (UAH 10.1 bln) for the replenishment of statutory capital of state banks.

As a result, internal debt grew 1.9% (by USD 0.5 bln) to USD 26.7 bln. External debt remains almost flat, rising 0.2% in March to USD 45.7 bln. The share of external debt decreased slightly to 63.2% from 63.6% in the prior month.

Alexander Paraschiy: Extra support for two state banks in March underpinned debt growth. In particular, the Cabinet approved the replenishment of the statutory capital of state banks Oshchadbank and Ukreximbank by UAH 5.4 bln and UAH 4.7 bln, respectively. Recall, a month ago in February, the Cabinet also injected UAH 3.5 bln into Oschadbank and UAH 3.0 bln into Ukreximbank by issuing state bonds as part of their statutory capital.

In April, Ukraine received USD 1.0 bln from the IMF and EUR 0.6 bln from the EU, which means that state debt will touch USD 74 bln. Further debt accumulation will be conditional on progress with implementing IMF requirements (including pension reform and farmland reform) and on potential demand for Ukrainian Eurobonds in 2H17. If everything goes smoothly, we might see public debt increasing to USD 76.3 bln (79.0% of GDP) by the year end, which is still below the 89.8% of GDP debt target for 2017 outlined by the IMF.