Fixed Income

December 10, 2018

Ukrainian sovereign Eurobonds regained most of their big losses last week after international investors came to the conclusion that nothing has really changed for the country despite the imposition of an official state of military emergency in 10 provinces after the Azov Sea incident with Russia on Nov 25. However, an inescapable fact of life is that the Ukrainian economy remains far behind its fundamental potential. As another example of the country’s inefficiency, there was a report from the Center for Economic Strategy think-tank stating that the cost of Ukrainian corruption totals a massive USD 8.6bn per year in lost investment, tax payments, and other revenue-raising opportunities - i.e. 7.6% of last year’s GDP of USD 112bn. Ukraine came in 77th out of 113 countries in the 2018 World Justice Project Index, which measures the rule of law worldwide based on 8 factors: constraints of government powers, the absence of corruption, the openness of government, fundamental human rights, o