Fitch expects Ukraine to receive only one disbursement from IMF, issue more Eurobonds in 2021

By bne IntelliNews March 1, 2021

International ratings agency Fitch says that it expects Ukraine to receive only one disbursement of $700mn this year under its $5bn stand-by agreement (SBA) with the International Monetary Fund (IMF) and will borrow more on the international capital markets to fund its debt obligations.

Ukraine had been expecting the $700mn to be paid out last summer, but the IMF programme has been suspended due to Ukraine’s backsliding on reforms. Kyiv had already received $2.1bn last June and was hoping to get both the $700mn and the remaining $2.2bn in the 18-month programme this year.

Ukraine has a heavy debt redemption schedule this year as some $16bn comes due with an $11bn surge in the third quarter. Economists worry that with only $29bn as reserves the government doesn't have enough money to be able to cover the debt repayments without burning through its reserves.

"Fitch also assumes for 2021 one IMF disbursement of $0.7bn, $1.5bn of other official financing, higher Eurobond issuance than the planned $1.4bn, and a 0.2% of GDP drawdown on fiscal reserves," the rating agency said.

An IMF team just carried out a virtual assessment of Ukraine’s economy that was inconclusive. The IMF is adding more conditionality for its help, but Fitch is pessimistic that Kyiv will be able to convince the IMF to release more money.

"In particular, parliamentary approval for anti-corruption and judicial reform legislation will be challenging. IMF prior actions in these areas were partly a response to Constitutional Court rulings in 4Q20 that restricted the powers of the national anti-corruption agency and withdrew criminal liability for false asset declarations. We see somewhat less implementation risk to the other significant new SBA requirement to reverse December's imposition of a temporary cap on gas prices," Fitch said.

Ukraine is likely to try to raise more money on its local debt market, where foreign investors recently returned after a sell-off in 2020. Investors have been enticed into the market by a better then expected economic performance in 2020, falling inflation in recent years and the high yields the debt pays. During the market’s first year of operation in 2019 the Ministry of Finance was able to raise $5bn from the local market.


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