Ukraine

Ukraine is betting that foreign aid and improved tax collection during an economic rebound will help it weather the financial tensions resulting from warnings by the U.S. and its allies of a potential Russian invasion, Bloomberg News reported. President Volodymyr Zelenskiy has said the U.S. and western media are undermining Ukraine’s economy by spreading “information panic” about the risk of a Russian attack. The government in Kyiv insists the more than 100,000 Russian troops massed at the borders aren’t enough for a full-scale invasion -- and the Kremlin denies any such plans.

NATO allies are bolstering the alliance’s eastern flank in response to Russia’s military buildup around Ukraine, as the European Union set out plans for loans and grants for Kyiv worth more than $1.3 billion, the Wall Street Journal reported. The moves are part of sharpening efforts by the U.S. and its allies to gird for what they believe could be an imminent military invasion of Ukraine, which Russia denies it is planning.

Ukraine's central bank raised its main interest rate to 10% from 9% on Thursday, crossing into double digits for the first time since April 2020, to try to tackle persistently high inflation and the economic fallout from a standoff with Russia, Reuters reported. The National Bank of Ukraine (NBU) said it could hike rates again at its next policy meeting in March and signalled that monetary conditions would remain moderately tight. It would also increase banks' reserve requirements next month.

Ukrainian sovereign dollar bonds tumbled into distress territory and Russian bonds suffered sharp falls on Monday as fears of another Russian military foray into Ukraine showed no sign of easing, Reuters reported. The premium investors demand to hold Ukraine bonds over safe-haven U.S. Treasuries as measured by the JPMorgan EMBI Global Diversified index surged past 1,000 basis points for the first time since the COVID-19 pandemic emerged in March 2020.

President Biden warned Russian President Vladimir Putin that the U.S. and its allies would meet a military escalation into Ukraine with a series of actions, including strong economic measures, bolstering Ukrainian defenses and fortifying support for Eastern European nations, as allies work together to prevent renewed conflict in Eastern Europe, the Wall Street Journal reported. For more than two hours on Tuesday, the leaders held a secure video call to address what the U.S. has described as large and unusual troop movement near Russia’s border with Ukraine in recent weeks. The U.S.

Ukraine has appealed to the European Union for additional financial aid as the country struggles to meet its obligations and faces the threat of a potential invasion from Russian troops massing on its borders, Bloomberg News reported. “We have formally requested from the European Commission a long-term, macro-financial program to ensure sustainable financing in the upcoming years,” Yuriy Butsa, Ukraine’s commissioner for public debt management, said via WhatsApp.

The International Monetary Fund approved a new tranche of aid to Ukraine and extended a $5 billion loan program by six months as the country pledged to progress in implementing reforms, Bloomberg News reported. The program “aims to help the authorities address the effects of the Covid-19 shock, sustain the economic recovery, and move ahead on important structural reforms to reduce key vulnerabilities,” the Washington-based lender said in a statement on its website Monday.

In early September, the Ukraine Parliament passed a law legalizing and regulating Bitcoin, step one in an ambitious campaign to both mainstream the nation’s thriving trade in crypto and to rebrand the entire country, the New York Times reported. “The big idea is to become one of the top jurisdictions in the world for crypto companies,” said Alexander Bornyakov, deputy minister at the two-year old Ministry of Digital Transformation.

International Monetary Fund staff and Ukraine have reached an agreement on economic reforms that will pave the way for a first review of the country's 18-month stand-by arrangement and its request for an extension through the end of June, the IMF said in a statement, Reuters reported. It said that completion of the first review of the $5 billion arrangement, now slated to expire in December, would enable disbursements of about $700 million to the country.

Ukraine’s economy fell back into recession as fallout from the pandemic continued to weigh and interest rates were lifted to tackle soaring inflation, Bloomberg News reported. Second-quarter gross domestic product shrank a seasonally adjusted 0.8% after falling 1.2% in the previous three months, preliminary data Monday showed. On an annual basis, it ended more than a year of contraction, advancing by 5.4%, though that was some way off analyst estimates for a 7.3% increase.