Ukraine appeals for $2 billion IMF loan; EBRD ready to invest in Ukraine; October merchandise trade deficit narrows; Crude steel output flat, seen up in January; Transportation data indicates mixed performance.
Ukraine appeals for $2 billion IMF loan
Ukrainian authorities sent a letter to the International Monetary Fund requesting an emergency loan of $2 billion. Prime Minister Yulia Tymoshenko, acting Finance Minister Igor Umansky and National Bank Governor Volodymyr Stelmakh signed the request. According to Deputy Prime Minister Hryhoriy Nemyria, Ukraine needs urgent financial assistance to cope with an “extremely difficult” situation with respect to its external obligations, including natural gas payments to Russia. However, Ukraine’s schedule of foreign debt repayments suggests the government’s fears may be overplayed and rather reflect its attempt to secure additional funding by playing the “default” card on the back of concerns about financial stability in the Eastern European region. The country is due to repay a relatively modest $2 billion to foreign lenders next year, including $1.5 billion of principal and $500 million of interest, with most of the redemptions not due until the end of the year.
EBRD ready to invest more in Ukraine
The European Bank for Reconstruction and Development is ready to invest more than 1.1 billion euro in Ukraine next year, an EBRD spokesman said. The EBRD has invested 1 billion euro in Ukraine since the beginning of 2009, mostly in the financial sector to help local banks cope with financial turmoil. Importantly, EBRD project loans are not dependent on IMF financing and therefore enable eligible Ukrainian companies to receive foreign currency support even while other sources of external financing remain hardly available as long as the IMF program for Ukraine remains on hold.
October merchandise trade deficit narrows
Ukraine’s merchandise trade deficit halved to $164 million in October compared to September, bringing the year-to-date trade gap to $4.3 billion, down from $17.7 billion over the same period in 2008. Exports in January-October declined an annualized 47 percent to $32 billion while imports were down 52 percent to $36 billion. Trade flows increased in October compared to September, with exports rising 12 percent (to $4.2 billion) thanks to higher sales of steel and chemical products and imports increasing 6 percent (to $4.3 billion) on higher imports of gas and other fuels. Net of gas imports, which stood at $463 million in October, Ukraine’s foreign trade posted a $300 million surplus over the period. With gas purchases on the rise in November-December, the full-year merchandise trade deficit is set to widen again, bringing the full-year gap close to $5 billion.
Crude steel output flat, seen up in January
Daily production of pig iron in Ukraine averaged 74,000 tons in the first week of December, remaining little-changed compared to the previous month and implying monthly steel output of 2.7 million tons (unchanged from November). This would bring full-year domestic steel production to 29.6 million tons, down 20 percent on the year before. In 2010 analysts expect Ukrainian steel output to rebound by 15 percent to 34 million tons, with January production seen up 10 percent compared to December to 3 million tons.
Transportation data indicates mixed performance
Cargo transportation volumes in Ukraine rose by an estimated 10 percent in November compared to October, reversing their decline in annualized terms to positive growth of 13 percent (versus a drop of 12 percent in October). Most of the month-on-month improvement in cargo turnover was attributable to higher pipeline transportation, while rail freight turnover, an indicator closely tied to industrial performance, inched down 2 percent, suggesting no improvement in industrial output dynamics last month. However, in year-on-year terms railway turnover expectedly surged by 15 percent in November on a low comparison base, and industrial production is also expected to rebound strongly due to the same reason. Separately, passenger transportation in Ukraine nosedived by an estimated 14 percent month-on-month in November on the back of a flu outbreak in much of the country over the period, widening its annualized decline to 19 percent.
