Ukraine state debt rises 6.2% m/m in December

Макроэкономика 28.01.2014 Ukraine’s state debt grew 6.2% m/m (USD 4.3 bln) in December to USD 73.1 bln, according to Finance Ministry data released on Jan. 27. External debt increased 6.8% (USD 2.4 bln) while internal debt grew 5.5% (USD 1.8 bln) during the month. For 2013, the state debt swelled 13.0% (USD 8.4 bln), primarily due to 37.5% growth (USD 9.7 bln) in internal liabilities. The share of external debt decreased to 51.4% from 60.0% a year ago. Alexander Paraschiy: The Eurobonds placement as part of the Moscow deal (USD 3.0 bln), combined with active state bond placements (UAH 14.2 bln) in December, were the key reasons for the December debt hike. As we expected, the authorities faced a dramatic state revenue shortfall (-2.0% yoy), prompting the government leadership to act hastily in attracting loans to cover the considerable fiscal gap. As a result, by the end of the year the state debt reached 40% of GDP (USD 73.1 bln), which is a critical level. We project the state debt to swell even more in 2014. The 2014 budget calls for the fiscal gap to exceed 7% of GDP, backed by Russia’s commitment to buy USD 12 bln in Ukrainian bonds this year. Already by the end of this week, we anticipate an extra USD 2.0 bln Eurobond placement announced by the Cabinet of Ministers. Against this backdrop, we estimate public debt to reach 44% of GDP by the end of 2014.