External Financing

The rehabilitation loan in the amount of 398 mln USD and EU bilateral agreement credit of 100 mln USD formed the major sources of external financing in 1995. Meanwhile we see gradual growth of external financing share, mainly by the World Bank (roughly 56%), EU and Japan in 1996.

To compensate for a negative net disbursement of Tbills in the Fall of 1997, government was forced to search for funds on private markets. Two tranches of hryvnia denominated hedged securities were issued in December 1997 and August 1998. The December issue raised 750M UAH through Merrill Lynch and the August issue, roughly 330M UAH through ING Barings bank.

Figure 5. Consolidated Deficit Financing % Source: State Treasury, UEPLAC, NBU. Calculations: ICPS

To improve the situation further, the Finance Ministry has issued three groups of eurobonds. First, Ukraine received ECU 488M from Euro-denominated Eurobonds floated in ECU in March, 1998. In May of the same year a second tranche of deutsche mark-denominated three-year Eurobonds generated DEM 259.35M.

External borrowing from official creditors has substantially contributed to financing in 1997, bringing to budget gross 600 mln USD, from the conditional World Bank loans, EU and other official creditors. The following year this borrowing decreased, resulting in a decline of the external financing share.

Figure 6. Consolidated Deficit Financing By T-bills % of government balance Source: State Treasury. Calculations: ICPS

Date: 2015-02-28; view: 830