In order not to allow the uncontrolled collapse of the hryvnia, the government of Ukraine is forced to make concessions to the IMF, suggests an article by Tetiana Ochymovska in the last KW issue.
The need to pay off its loans from foreign creditors is forcing the government of Ukraine into new debts. Overall in 2013, the Ministry of Finance is obligated to pay USD 5.833bn for the domestic and foreign debt (principal without interest) and the NBU must pay another USD 3.08bn. “In addition to that the government needs to repay USD 2bn for currency T-bills over the year and USD 1bn for government Eurobonds,” says Chief Trader at the First International Financial Agency Olena Dudnyk, interviewed by the weekly.
On the backdrop of such investments, Ukraine’s Eurobonds seem more than reliable. “Thanks to massive injections of the world’s central banks and primarily the U.S. Federal Reserve System, markets are filled with money that is invested primarily into financial assets. The profitability of Ukrainian Eurobonds is extremely high. That is why there will be excess demand as long as the current incentive programs continue,” says Director of the Investment Business Service at UkrSibbank BNP Paribas Group Oksana Shveda.
However, as the central bank does not think to be able to maintain the stability of the hryvnia from inevitable crash. Given this, the government of Ukraine will have no other choice but to hike the rates of gas for households.