But market interest expected to be low due to high risks, according to bankers
YIV, Sept 22 – Ukraine’s government plans to issue Hr 10.5 billion ($2 billion) of bonds to the National Bank of Ukraine to restructure overdue debt, but market interest will be low due to high risks, bankers said on Friday.
First Deputy Prime Minister Yury Yekhanurov told reporters the government would consider the plan at a meeting later in the day. “I think we will approve the draft order at today’s government meeting,” he said.
Ukraine’s central bank has been the main buyer of domestic debt since 1998, when foreign investors deserted the market following a financial crisis, and commercial banks were discouraged from purchases after several debt restructurings.
The draft showed the face value of the planned paper would be Hr 1,000. The finance ministry plans to issue paper with monthly coupons and maturities between 16 and 124 months.
The papers would yield 18.86 percent annual in 2001, yields for 2002-2010 would change in line with inflation, it said.
A debt agreement on overdue treasury bills between the central bank and the Finance Ministry is one of the key conditions required to unlock a stalled $2.6 billion International Monetary Fund loan program.
MARKET FUTURE FOR BONDS CLOUDY
Central Bank Governor Volodymyr Stelmakh has said the central bank would sell the new bonds at the secondary market, hoping to revive the domestic debt market.
But bankers were pessimistic about the future of the new bonds. “I do not believe these papers can be popular on the market, the risk is too high,” a Western banker said.
“There is no trust in government securities, and the finance ministry’s failure to redeem t-bills last week destroyed it for another several years to come. I am very pessimistic.”
The Finance Ministry failed to repay a t-bill last week, putting it in technical default, though Prime Minister Viktor Yushchenko on Thursday said the government had completely repaid bill holders.
“After the crisis the finance ministry regularly paid on time for two years and now (it happened) again…it will be very difficult to sell anything to commercial banks now,” another senior Western banker said.
Stelmakh has said the ministry had failed to repay t-bills worth some Hr 2.9 billion since the start of the year.
Domestic debt market, which started to recover slowly this year, was put to a virtual stop this month, bankers said, adding there were no chances to revive it in any time soon due to uncertainty over government policies towards domestic creditors. “They pay foreign debts on time so far but they have over 20 billion (hryvnas) in domestic debt and nobody has said yet how they are going to repay it,” the banker said.
Ukraine’s foreign debt slipped to $10.6 billion on June 1, 2000 from $12.4 billion at the start of the year. But domestic debt rose to Hr 23.1 billion in June from Hr 15.0 billion in January.
