Andrew Katasonov

It seems the economic situation in Ukraine is not as bad as I described in my earlier post.

The country’s debt level remains manageable. Ukraine’s pre-crisis gross external debt-to-GDP stood at a healthy 57%. After the crisis erupted, debt remained stable at around $100 billion but the contraction of GDP pushed the ratio to an estimated 90% by end-2009. On this measure, Ukraine has a considerably more secure position than emerging European Union peers such as Hungary (186% by 3Q09), Bulgaria (123%) or Slovenia (119%).

Ukraine’s end-2009 external public debt amounted to $24 billion, or 21% of GDP. A mere $1 billion out of this amount is due in 2010, with the country’s current international reserves totaling $25.3 billion. In the private sector, refinancing the current portion of the external debt ($80 billion in total, $18-$20 billion due in 2010) is hardly a “miracle scenario” since the bulk of this amount is related-party cross-border lending in the corporate sector. Out of an estimated $28 billion that was due in 2009, 82% was rolled over.

Although the budget suffered from the economic downturn (we estimate the 2009 budget gap at about 9% of GDP, or $10 billion), Ukraine financed the deficit without extensive money printing—largely thanks to the IMF stand-by program. This helped to stabilize the currency and reduce inflation to 12.3% in 2009 from above 20% in 2008.

The global commodity recovery is supporting Ukraine’s steel giants, and the economy has been growing for three successive quarters at 2.5% on average (10% annualized). We record a clear revival of local, Russian and Western interest in Ukraine’s market, with the stock index up 273% from its bottom in March 2009 and 47% so far in 2010.

As of January 31, 2010 public and publicly guaranteed debt of Ukraine amounted to 301 billion 538 million 747.28 thousand UAH, or 37 billion 686 million 690.45 thousand dollars. At the same time, reserves of the National Bank of Ukraine (NBU) amounted to 25 billion 285 million 920 thousand dollars on January 31, 2010. Economic situation in Ukraine is worsening and Ukraine is headed to bankruptcy.

These include: public and publicly guaranteed external debt – 195 billion 286 million 531.99 thousand UAH (64.76% of the total public and publicly guaranteed debt) or 24 billion 407 million 155.45 thousand dollars; State and publicly guaranteed internal debt – 106 billion 252 million 215.29 thousand UAH (35.24%), or 13 billion 279 million 535,00 thousand dollars, the press service of the Ministry of Finance.

The public debt of Ukraine amounted to 212 billion 133 million 243.04 thousand UAH (70.35%), or 26 billion 512 million 678.50 thousand U.S. Public external debt amounted to 119 billion 939 million 835.96 thousand UAH (39.78 %), or 14 billion 990 million 230.97 thousand U.S. State domestic debt amounted to 92 billion 193 million 407.08 thousand UAH (30.57%), or 11 billion 522 million 447.53 thousand U.S. dollars.

Publicly guaranteed debt of Ukraine amounted to 89 billion 405 million 504.24 thousand UAH (29,65%), or 11 billion 174 million 011.95 thousand dollars, including: guaranteed external debt – 75 billion 346 million 696.03 thousand UAH (24.99%), or 9 billion 416 million 924.48 thousand dollars; guaranteed internal debt – 14 billion 058 million 808.21 thousand UAH (4.66%), or 1 billion 757 million 087.47 thousand dollars . During January 2010 the sum of public and publicly guaranteed debt of Ukraine has increased by UAH equivalent to 26 million 010.36 thousand UAH (0.01%) mainly due to excess of proceeds from the bonds of internal state loan repayment over a public domestic debt.

In this case, the public external debt decreased by 614 million 278.69 thousand UAH (0.51%), internal debt increased by 1 billion 123 million 330.31 thousand UAH (1.23%).

Publicly guaranteed debt of Ukraine decreased by 483 million 041.26 thousand UAH (0.54%), which is associated with a depreciation of the euro against the hryvnia, and in excess of repayment guaranteed debt over the amount of borrowing.