Ukraine expects official approval of a new $8.2 billion program with the International Monetary Fund in the coming weeks, said government commissioner for public debt management Yuriy Butsa in an interview with Reuters, writes UNN.
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The agreement, which is to replace the existing $15.6 billion IMF loan facility, will help Ukraine maintain economic stability and public spending amid an expected budget deficit of almost $140 billion in the coming years, the publication writes.
In an interview with Reuters, Yuriy Butsa said that the official approval of the IMF Board of Governors for the allocation of funds should happen "very soon."
I'm waiting for it within a few weeks. I think February is a quite realistic timeframe
Since Russia's invasion of Ukraine on February 24, 2022, the publication writes, Ukraine has needed hundreds of billions of dollars in support from Western governments and institutions, as well as a restructuring of sovereign debt totaling over $20 billion.
"We are now waiting for a new IMF program, but we have already agreed on all the figures for this and next year and will cover the budget deficit with existing commitments," Butsa said, also praising the new EU loan of 90 billion euros.
He said he was not overly enthusiastic about talks of a possible US-brokered ceasefire ahead of this month's anniversary, the publication writes.
Ukrainian President Volodymyr Zelenskyy said on Wednesday that the US needs to increase pressure on Russia if it wants the war to end by summer, adding that it is unclear whether Moscow will participate in US-brokered peace talks next week.
"We need to plan everything carefully, we cannot be too optimistic about any news," Butsa said, explaining that a ceasefire would still not end the financial pressure.
"The reason is that even with a ceasefire, we consider it necessary to maintain a strong and numerous army, and we will still have to rearm," Butsa pointed out.
Bond prices rose after difficulties in relations with the US last year.
He said that "Ukraine is unlikely to rush to issue new bonds on the international market after the war ends." Instead, it "will continue to use cheap concessional loans and borrow in local currency debt markets, where it does not face currency risk."
As Ukraine's IMF program is underpinned by a so-called debt sustainability analysis, Butsa said the government would also not be able to provide "guarantees" to help state-owned companies such as "Ukrzaliznytsia" and "Naftogaz" restructure their debts.
"We have very serious restrictions on sovereign guarantees, because all of this is part of the same debt sustainability analysis," he added.
"Therefore, we cannot actually issue guarantees," while this could help companies develop "proper long-term business models."
As the publication writes, another important area this year will be "wartime capital controls, which the government wants to gradually lift."
The next key step, it is reported, will be "allowing international investors to repatriate principal – or the principal amount of debt, as bankers say – which they lend to Ukraine when buying its local currency bonds."
Butsa said this is an "important element" in Ukraine's efforts to sell more local currency bonds in the future and a step that could potentially happen before the end of the war.
Ukraine is also working with Clearstream, owned by Deutsche Boerse, to make its bond market more attractive and wants to become part of the European Central Bank's TARGET2 system, which processes trillions of euros in payments and transactions daily.
"We don't have a big legacy (system) to worry about, so we are happy to immediately create what works best," Butsa said, adding that the government will likely start looking for a "strategic" partner company this year for development.
He also hoped to restore Ukraine's positions in emerging market indices, such as the widely used JPMorgan GBI-EM index, focused on local sovereign bonds, which attracts billions of dollars in investments. Ukraine only once, in March 2022, achieved the inclusion of one of its bonds, whose maturity has already passed, in the index.
"This is definitely part of our strategy - we want to come back," Butsa said. "Our goal is for our bonds to meet the index criteria, and for our local market to become a very large and sustainable source of financing."