As part of a government drive to raise more money to pay for the war, Ukraine’s Ministry of Finance (MinFin) has made it possible for foreign individual investors to conveniently buy federal treasury bonds (OVDP) with a click of a mouse, the ministry said in a press release on September 22.
MinFin has launched online trading for anyone that wants to invest into the high-yielding OVDP bonds from any country, hoping to tap the millions of ordinary supporters Ukraine has around the world.
The initiative was developed in a collaboration between the MinFin, the National Securities and Stock Market Commission (NSSMC), the National Bank of Ukraine (NBU) and the privately owned ICU Financial Group. ICU Financial Group offers access to bonds via its online platform ICU Trade.
The portal allows non-resident investors to remotely register with a broker and engage in buying and selling domestic government bonds, mirroring the process available to Ukrainian citizens. Residents of Russia and Belarus cannot access this service.
This initiative was driven by the desire of many foreign citizens to support Ukraine amid Russia's full-scale aggression without the necessity of a physical presence in the country. Previously, the absence of a regulatory framework and the necessary technical infrastructure for online transactions prevented Ukraine’s supporters from buying the bonds.
The OVDPs were first made available to international investors after Ukraine’s capital market was hooked up to Belgium’s Clearstream payment and settlement system in May 2019. That opened the floodgates to around $5bn of fresh investment into Ukraine’s domestic bond market, quickly becoming a major new source of liquidity for the government. Since the war began yields on the bonds have risen steeply and the volumes invested in have fallen, but OVDPs remain a significant source of funds for the cash-strapped government.
Notably, Ukraine does not levy income tax on government bonds, making them an attractive investment option.
"We are pleased to announce that the first Ukrainian broker has successfully completed a project to provide remote access to government bonds for non-resident individuals. This will allow foreign citizens to support us in our fight against the aggressor by investing in our victory. This event marks a step forward in the development of Ukraine's government bond market and we look forward to other market participants supporting this initiative. Government bonds are the second-largest source of funding for Ukraine's State Budget this year and we are committed to continuing to work on expanding access to this market for all types of investors," Yuriy Butsa, Government Commissioner for Public Debt Management, said in a statement emailed to bne IntelliNews.
"This event is a landmark for Ukraine and its investment potential [at] such a difficult time for all of us. However, we are moving forward and have now become even more accessible to foreign investors. Citizens of our partner countries around the world can join the economic recovery and rebuilding of Ukraine online by purchasing our domestic government bonds. The digitalisation of such processes is important for domestic capital markets and is a worthy example to follow," said Yaroslav Shlyakhov, member of the National Securities and Stock Market Commission.
Currently, citizens from the EU, the UK, the US, Canada, Israel, Australia, Japan and other countries have the opportunity to buy domestic government bonds online. However, it's important to note that the registration process for investors from some countries may be longer due to variations in legal frameworks and mobile operators' specificities.