23:17 PM Friday, September 21, 2018
Ukraine Targets Up to $1 Billion Via World Bank Loans
Access to world bond market is nice, but concessionary financing from IFIs is cheaper; Ash: Poroshenko goes wobbly on anti-corruption fight
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By Daryna Krasnolutska

(Bloomberg) -- 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
Ukraine 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
“We’re in talks with the World Bank, but we haven’t reached
a final agreement yet and this number may be significantly
smaller,” said Butsa, who was part of the ministry team that
joined the Eurobond roadshow. “To borrow from international
financial institutions and other official lenders is much
cheaper than going to the market.”

Satu Kahkonen, World Bank director for Belarus, Moldova and Ukraine, warned last week at ICU’s Ukrainian Financial Forum that Kyiv must stick with the reform program in order to receive more low interest loans. She said: “This is not the time for complacency. This is the time speed up reforms.”

The former Soviet republic secured billions of dollars of
Western financing in the wake of its second pro-European
revolution in a decade, which toppled Russian-backed leader
Viktor Yanukovych in 2014. But the flagship program -- a $17.5
billion bailout from the International Monetary Fund -- has
suffered repeated delays as the government’s commitment to anti-
corruption efforts comes into question.
Butsa, speaking in the Black Sea city of Odessa, where he
attended the Ukrainian Financial Forum, also said:
* “We’ll prioritize borrowing on the domestic market next year.
We’re talking to primary dealers now to see if there’s demand
for longer maturities”
* The Finance Ministry wants to get a 600 million-euro ($700
million) tranche from the European Union or “will need to
substitute it with something else and to borrow at a higher
* The government has met two-thirds of the terms needed for the
EU disbursement. “I think we’ll complete most of the remaining
tasks within a couple of weeks.” The key issue is getting
parliament to approve lifting an embargo on wood exports
* The Finance Ministry wants to move away from selling domestic
bonds denominated in foreign currencies. “We want to avoid
offering this instrument again on a large scale because we want
to develop hryvnia-denominated instruments”
* “We see significant interest in hryvnia-denominated
instruments as they offer double-digit yields. Taking into
consideration low hryvnia volatility, such instruments become
very attractive for investors”

The government plans to borrow 215 billion hryvnia ($8
billion) on domestic and external markets in 2018; the IMF
program envisages raising $2 billion internationally.

To contact the reporter on this story:
Daryna Krasnolutska in Kiev at

Poroshenko Says All Ukrainian Courts Will Tackle Graft

By Daryna Krasnolutska
(Bloomberg) -- Ukrainian President Petro Poroshenko says in
interview with Canada’s CBC that “all courts in the country
should be anti-corruption.”
* “This is the same as in Canada, in the U.S.”
* “I am absolutely confident that it is vital for us to create
an anti-corruption system in the whole court institution of
* “I think it should happen, it should be launched in two weeks’
* NOTE: Ukraine needs to set up special anti-corruption court to
unlock next tranche of $17.5b IMF loan

To contact the reporter on this story:
Daryna Krasnolutska in Kiev at

Timothy Ash:

The President is picking up on the line from John Kerry at the YES conference in Kyiv.

The reality is that reforming the whole system is a huge task, and progress thus far has been limited. There are lots of places for graft to hide. Having special anti-corruption courts leads to hopes of better protection for judges, able to lead by example, and to ensure someone/anyone is brought to account, to more quickly send a signal that corrupt practice will not be tolerated, and to ensure that behavior changes to the benefit of everyone. At this late stage going back on earlier promises is not very encouraging. It suggests foot dragging at the top,d especially given existing commitments made to IFIs and the population at large. Is this all just a strategy to buy time beyond the 2019 elections?

In the last few days, I have heard some interesting Ukrainian counter arguments on the anti-corruption gig, that that is how Ukraine works/operates, Ukrainians are used to it, and it has to be a gradual process.

No, no, no...then don't complain about a lack of foreign direct investment. If you want bigger inflows of FDI, then the business environment has to improve, and the industrial scale corruption which Ukraine excelled in has to be reined in.

Now, while the likes of Germany, UK, Sweden, et al might not be entirely clean, pushing the line that all countries have corruption is not a great defense from Ukrainian policy makers.

The bigger problem in developed market jurisdictions is still not having strong enough know your client rules to deter corrupt elites in places like Ukraine from depositing their ill gotten gains abroad, in "clean", "safe" jurisdictions.

The UK, et al, have to do much more to address this problem. The UK/EU does not do enough. Teresa May holding a few conferences here and there is just window dressing.

If corrupt elites could not lodge their cash offshore, they might have more of an interest in cleaning things up at home. One obvious step would be setting higher default know your client bars for high risk jurisdictions - and doing more to counter elites buying offshore passports.

Timothy Ash is senior sovereign strategist for emerging markets at BlueBay Asset Management in London.

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