$3 billion Eurobonds: good news, bad news

UKRAINE - In Brief 18 Sep 2017 by Dmytro Boyarchuk

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Finance Ministry and President Office opened the champagne today. The Finance Ministry did a great job raising $3 billion in the open market just a few years after default. President's Office now reconciles new political prospects given that they no longer hang solely on the IMF funding. No doubt the news is definitely positive since it shows the improving perception of Ukraine abroad. However, it also raises risks of halting reforms amid easing financial pressure. In fact it was a similar story with ex-president Victor Yanukovitch, who gave up complying with the IMF demands as soon as excessive liquidity from quantitative easing flooded the market. Hopefully this time the current president will be more careful. So what are the implications of this placement? Firstly, chances to pass smoothly the pre-election years increased. Now President's Office can put on hold the most painful measures without risking to run out of money on the eve of voting. Also it increases chances for President Poroshenko to resurrect his personal popularity over the next year and a half. Secondly, this placement might draw more attention to the country for other investors who might be willing to bring money into local production despite that corruption is still high. Thirdly, unfortunately, this success might trigger a reverse in some reform efforts, especially in those that threaten rent-seekers. Pension reform is secured, in my view, because it presumes immediate increase in pensions (even the draft law on this reform was named “on increase of pensions”, not about reform). However, anti-corruption court and strengthening capacities of the national anti-corruption bureau is now under a questi...