No risk of Ukraine default, FX to help C/A gap-cbank

12:37, 27 November 2008
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A senior Ukrainian central bank official said

A senior Ukrainian central bank official said on Thursday he saw no risks of sovereign or corporate defaults in the next two years, Reuters reported.

Deputy Chairman Oleksander Savchenko also described the hryvnia currency exchange rate to the dollar as "a bit shocking" though he said it was already close to an equilibrium.

Savchenko said corporate borrowers were due to repay about $4 billion in 2008 and a further $30 billion in 2009.

"In accounting terms, Ukraine has no risk of default, as regards both the corporate sector and the state, for at least the next two years," Savchenko told a conference. "We have sufficient currency reserves."

Ukraine has about $32.5 billion left in its foreign currency reserves after spending about $2 billion on interbank intervention this month.

He said lower fuel prices and what he described as anticipated "moderate" prices for gas, combined with the current exchange rate, "will lead to a zero or minor current account deficit of no more than 1-2 percent of GDP".

Reflecting the central bank`s policy of letting the hryvnia slide in a managed way to find its own balance, Savchenko said there was no point in wasting reserves to prop the currency.

"If the central bank continues to spend its reserves, it will simply postpone the process of correction and finding an equilibrium, which we believe has almost been found," Savchenko said.

"The rate we saw today, yesterday and the day before, that is a bit shocking but it is a proper assessment by business not only of the balance of payments but of our political crisis."

The minimum price for the dollar at a central bank auction on Wednesday was 6.74 hryvnias. The hryvnia weakened on Wednesday, at one point trading at 7.00-7.25, a similar rate to a historic low last month before strengthening to 6.7-6.8 after the central bank`s announcement.

Reuters via Guardian

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