MinFin Targets Reduction of Debt-to- GDP from 52% to 47% by End-2020

June 11, 2019

The Finance Ministry aims to reduce the country’s government debt-to-GDP ratio from the current level of near 52% to 47% by the end of 2020, according to the Medium Term Strategy for State Debt Management for 2019-2022 approved by the Cabinet on June 5.  
The Strategy includes the following steps:
- Increasing the proportion of the state debt in the domestic currency.
- Attracting foreign investors into domestic government bonds denominated in the local currency.
- Extending the average term length of government securities and ensuring a uniform schedule of repayment of the state debt.
- Implementing operations for active state debt management in order to reduce the peak load on the budget and stimulate demand for government securities.
- Ensuring full access of Ukraine to the international capital market.
- Increasing long-term privileged financing by expanding cooperation with international financial institutions (in particular, the World Bank, IMF, EBRD, EIB) and partner countries.

We were somewhat confused by the fact that MinFin has not included the state guaranteed debt of USD 11.1bn into its calculation of the debt to GDP ratio. If included, then the current level of public debt to GDP stands at 60%. Government Debt to GDP in Ukraine averaged 42% from 1997 until 2018, reaching an all time high of 81% in 2016 and a record low of 12% percent in 2007.  The overall Ukrainian public debt was reported at USD 78.3bn at the beginning of this year. The share of internal debt was 35.6% and the external debt share was 64.4%. In the structure of the USD 67.2bn state debt, domestic hryvnia-denominated debt accounted for 33%, followed by Eurobonds (33%), debt to IFIs (22%), domestic forex-denominated debt (8%) and ‘other debt’ (3%). The country’s debt redemption and servicing payments are estimated at UAH 390bn (USD 14.5bn) in the next 12-month period. MinFin is due to pay UAH 243bn (USD 9.1bn) to cover the country’s internal debt and USD 5.4bn for the external obligations in the period.   

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