Ukraine issues $1.25 billion Eurobonds amid withdrawal from local securities

UKRAINE - In Brief 27 Apr 2021 by Dmytro Boyarchuk

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MinFin is in progress of placing $1.25 billion Eurobonds with 6.875% yield according to Interfax news agency. We did not expect the authorities to start placement that early given “no progress with the IMF”. However, dried up inflow of foreign cash into local bonds and even withdrawal of non-residents from state securities amid tension with Russia left little room for maneuver. MinFin has an ambitious plan for both local and external borrowings in 2021 to cover short-term debt liabilities and sudden stop with non-residents undermined the plan. Very likely the announced withdrawal of Russian army from Ukrainian border will bring some non-residents back to Ukraine. But the authorities decided not to wait for better days and tapped the market as soon as conditions improved. In our forecast, we are currently drafting, we still assume a deal with the IMF in H2 2021. But we perfectly understand that any progress with reforms might happen only under financial pressure. Recent talks about potential extra SDR allocation by the IMF, which might bring additional $2.73 billion to gross international reserves, is an obvious risk for the program. However, no doubt, it’s an encouraging news for short-term macro-stability of Ukraine.