Ukraine

The International Monetary Fund approved a new $3.9 billion bailout program for Ukraine to help stabilize the economy and help the government pay back its debts, according to President Petro Poroshenko, Bloomberg News reported. The board of the Washington-based lender agreed on Tuesday to provide the eastern European country with the first $1.4 billion disbursement. It’s part of the stand-by program which replaces a bailout that suffered long delays as the government failed to implement the reforms necessary to release the cash.

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Ukraine’s central bank declared insolvent Kremlin-run lender VTB’s local subsidiary on Tuesday, ending a long-running struggle over the Russian state’s role in the country after the annexation of Crimea, the Financial Times reported. The National Bank of Ukraine said it would wind down VTB Ukraine’s operations after its Moscow parent “failed to comply with banking law and the [NBU’s] regulations” and “made no attempt to keep the bank solvent”.

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A deepening row between Russia and Ukraine ignited by a naval skirmish at the weekend has sparked falls in both countries’ financial markets, the Financial Times reported. Ukraine’s government bonds issued in foreign currency faced significant drops in price, which sent yields rising. Yield on a 10-year dollar-denominated bond maturing in November 2028 jumped 38.7 basis points to 10.832 per cent, its highest level since issuance. A 15-year dollar bond that matures in September 2032 faced a similar rise in yield to 10.385 per cent, also a record high for the paper.

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The International Monetary Fund on Friday announced it had reached preliminary agreement on a new $3.9bn assistance package for Ukraine, whose government hours earlier took the politically unpopular decision of meeting a key condition of the fund by raising household gas tariffs by 23.5 per cent, the Financial Times reported. The new 14-month programme has yet to be approved by the IMF’s executive board.

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Ukraine posted its tenth successive quarter of growth earlier this year with a 3.6 per cent year-on-year increase in GDP in the period April to June. Although still well below its real potential growth rate, this is progress for a country that stood on the brink of financial collapse four years ago, the Financial Times reported in a commentary. It also represents a qualified success for western policy, which eschewed a military role in the conflict with Russia in favour of measures designed to shore up Ukraine’s economic sovereignty.
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While the war in Ukraine’s east continues to rage four years on, the battle between Russia and Ukraine is returning to the calm and order of a London courtroom. There, British judges, unwilling to play diplomat, are this week set to rule on an appeal by Ukraine that it must repay part of a $3 billion bond in default, Bloomberg News reported. The Court of Appeal will rule on the case after Russia won an early verdict last spring in a lower court. The dispute “has multiple venues, and courtrooms are one of them," said Orysia Lutsevych, a research fellow at the Chatham House thinktank in London.
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Ukraine will favor cheaper borrowing from official lenders as it seeks to shore up next year’s budget, and plans to enlist the World Bank to help raise as much as $1 billion, Bloomberg News reported. The eastern European nation is examining the possibility of using World Bank guarantees to attract financing, Deputy Finance Minister Yuriy Butsa said last week in an interview that was cleared for publication Tuesday. The government sold $3 billion of Eurobonds this month for the first time since a 2015 debt restructuring.
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Already reeling from a $4.5 billion bill to save its ailing No. 1 lender, Ukraine is now bracing for an even costlier rescue, and says audits by PwC’s local office were instrumental in the bank’s failure, Bloomberg News reported. The government may have to stump up 38.5 billion hryvnia ($1.5 billion) more to recapitalize Privatbank after last year’s state takeover, according to documents seen by Bloomberg. The figure is from due diligence carried out by Ernst and Young Audit Services LLC, which estimated a “conservative” shortfall of 192 billion hryvnia before nationalization.
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Ukraine's largest steelmaker, Metinvest said on Wednesday steel and coke assets in territory controlled by pro-Russian separatists had been seized by rebels, the International New York Times reported on a Reuters story. "Metinvest does not expect any such seizure to have a negative effect on the implementation of its debt restructuring," the company said in a statement. Metinvest's bond holders and banks agreed a restructuring last month. Metinvest is part of the business empire of Ukraine's richest man, Rinat Akhmetov.
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Embarrassed members of Ukraine’s parliament have given up a pay rise to try to defuse public anger after an exercise in transparency revealed they held hundreds of millions of dollars of assets from expensive cars to prized works of art. Tens of thousands of civil servants were required to file public “e-declarations” of their wealth as part of a far-reaching anti-corruption initiative backed by western donors to the war-scarred country.
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