KYIV. Oct 3 (Interfax-Ukraine) – Fitch Ratings has affirmed the city of Kyiv’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘B-‘, reads a posting on the rating agency’s’ website.
“The agency has also upgraded the city’s National Long-Term Rating to A-(ukr) from ‘BBB(ukr)’. The outlooks are stable,” it says.
“The upgrade of the National Rating reflects the city’s consolidated fiscal performance with a continuous surplus before debt variation leading to stronger liquidity. The ratings also factor in a weak institutional framework for subnationals in Ukraine (B-/Stable), still material contingent liabilities and unsettled liabilities on the non-restructured part of Kyiv’s eurobond,” Fitch experts said.
“Fitch projects Kyiv’s budgetary performance will stabilize over the medium term with an operating balance moderately declining to 25% of operating revenue after an exceptionally high almost 40% result in 2016. During H1, 2017, the city recorded a UAH 5.6 billion surplus driven by fast tax revenue growth and much slower expenditure dynamic due to capex concentration in H2, 2017. We expect expenditure acceleration until year-end and forecast a full year surplus of about UAH 2 billion or 5% of total revenue, down from an exceptionally high surplus of UAH 3.7 billion (11.6%) in 2015 and UAH 5.1 billion (13.2%) in 2016,” they stated.
“The surplus before debt variation could narrow to zero in 2018-2019 due to expenditure acceleration and lower revenue growth. High fiscal surpluses in 2015-2016 were achieved amid a high inflation environment and supported by new revenue sources allocated to the city, leading to a rapid increase of tax proceeds that outrun the indexation of major expenditure items,” the document reads.
“Following material fiscal surpluses over the last three years Kyiv’s direct risk has been gradually declining to moderate 32% of current revenue in 2016 from peak of 67% in 2014. However, the debt is fully U.S. dollar-denominated exposing the city to FX risk. As of mid-2017, direct risk consisted of $351.1 million obligations to Ukraine’s Ministry of Finance (MoF), and $101.15 million of the non-restructured part of Kyiv’s $250 million eurobond. Fitch assesses the prospects of non-restructured debt settlement as vague over the medium term, given the slow pace of Kyiv’s negotiations with bondholders and the moratorium that was imposed by central government. Fitch will monitor the pace of Kyiv’s negotiation with bondholders,” Fitch reported.
Liabilities to the MoF arose as a result of the exchange of Kyiv’s $550 million eurobonds into Ukraine sovereign debt in December 2015. According to the terms of debt exchange the city compensates the state budget with the coupon payment related to this debt servicing and should repay the principal in two equal instalments in 2019 and 2020. This exposes the city to refinancing needs of $351.1 million (UAH 9.2 billion at end-Q3, 2017). However, part of this debt will be offset according to recent Ukrainian government decision. In particular the liabilities will be reduced by UAH 1.9 billion (equivalence to Kyiv’s repayment of domestic bonds series G in November 2016), and by the amount of Kyiv’s capex on bridge construction (about UAH 1.1 billion in 2017). Fitch expects the city will continue negotiations with the central government on restructuring the remaining part,” they added.
Kyiv’s contingent risk remains material. The city has issued several guarantees totaling about UAH 2 billion as of mid-2017 to support projects in public transportation, infrastructure and energy saving. Most of the guaranteed loans are euro-denominated and relate to two city-owned companies, Kyivpastrans and Kyiv Metropoliten. The guarantees expire in 2018-2021,” the report says.
“Kyiv benefits from its capital status and remains one of the wealthiest cities in the country, historically accounting for more than 20% of the country’s GDP. Nevertheless, Ukraine’s wealth metrics remain weak by international standards. Ukraine’s economy demonstrated mild restoration in 2016 and Fitch estimates Ukraine’s GDP grew 2.2% y-o-y in 2016 (2015: 9.9% contraction) and expects 2%-3% growth in 2017-2018,” it stated.
“The weak institutional framework governing Ukrainian local and regional governments (LRGs) remains a constraint on the city’s ratings. The framework is characterized by long-lasting political instability and a challenging reform agenda implied by Ukraine’s IMF program. This resulted in frequent changes in the allocation of revenue sources and the assignment of expenditure responsibilities, which hinder the predictability of LRGs’ fiscal policy and its planning horizon remains short,” the agency summarized.
KYIV. Oct 3 (Interfax-Ukraine) – Ukraine’s goods turnover with Australia in January-June 2017 grew by 56%, Ukrainian Prime Minister Volodymyr Groysman has said.
According to the press service of the Cabinet of Ministers, after a meeting of the Ukrainian prime minister with President of the Senate Stephen Parry in Kyiv on Monday the sides discussed cooperation between the two countries.
“Groysman invited business circles of Australia to enhance investment activities in Ukraine and expressed interest in increasing trade turnover between the two countries, which has soared by over 56% as a result of seven months of the year,” the press service said.
The prime minister said that nowadays the countries have greater potential in bilateral trade than they show.
According to the report, in January-July 2017, goods turnover between Ukraine and Australia expanded to $112.9 million (a rise of 56.3%), exports to $7.82 million (a rise of 53.8%) and imports – $105.11 million (an increase of 56.5%).
KYIV. Oct 3 (Interfax-Ukraine) – The facilitation of the visa regime, in particular the reduction of terms of considering visas for health tourists by embassies, could increase their inflow to Ukraine by 10%, President of the Ukrainian Association of Medical Tourism Violetta Yanyshevska has said.
“The number of health tourists in Ukraine could grow by 10% if we relax the visa procedure. If we create favorable conditions in other factors, the flow could increase several-fold,” she said at a press conference at Interfax-Ukraine on Monday.
She said that the number of health tourists entering Ukraine in 2016 was around 55,000 patients, including citizens of Israel, Italy, Spain, Iraq, Kazakhstan, Uzbekistan, Georgia and Azerbaijan. Mainly foreign patients travel to Ukraine to receive rehabilitation and dentists’ services, plastic surgery, cell therapy, cardiovascular surgeries and treat ophthalmic diseases.
KYIV. Oct 3 (Interfax-Ukraine) – Ukrainian President Petro Poroshenko has backed the idea of creating the new public system for financial and economic maintenance of forest industry – a financial forest fund, according to a posting on the website of the State Forest Agency of Ukraine.
“The draft strategy [for development and institutional reformation of forest industry in Ukraine for the period until 2022] has principles of public governance and financing and returning of the status of the key spending unit of budget funds to the State Forest Agency. The new public system for financial and economic maintenance of forest industry – a financial forest fund – is presented,” Deputy Chairman of the State Forest Agency Volodymyr Bondar said.
He said that the issue was discussed at a meeting on the improvement of the public policy in the field of forestry and hunting economy chaired by Ukrainian President Petro Poroshenko in Ivano-Frankivsk last week.
“The Ukrainian president backed the proposed idea and instructed to work out the issue jointly with the Finance Ministry,” the authority said.
The creation of the financial forest fund would help to prevent unlawful logging, introduce the balanced forest industry in southern and eastern parts of the country, conduct a stocktaking, prevent natural disasters and their aftermath, prevent outbreaks of forest pest spreading and forest diseases and cultivate planting stock.
The draft strategy also has a mechanism for improving the institutional structure of forest industry.
“We enshrine the principle of dividing management functions – management and oversight. Foresters should cultivate forest and protect it. Forest inspectors of the State Forest Agency should fulfill the oversight function,” Bondar said.
The agency believes if the strategy is adopted, the country would be able to secure stable development of forest industry meeting Ukraine’s international liabilities, create the effective management and oversight system, ensure planting of new forests and preserve biodiversity, settle the timber market, create new jobs and attract investment in the forest sector.
KYIV. Oct 2 (Interfax-Ukraine) – Ukrainian President Petro Poroshenko on September 29 took part in the opening of a new plant of the German concern Leoni for production of cables for the automotive industry in Kolomyia (Ivano-Frankivsk region).
“Today’s event is important, especially if to consider that Leoni concern is one of the world’s largest producers of electrical cable networks. Leoni’s key customers are General Motors, Volkswagen, Audi, Porsche, Lamborghini and other elite brands of cars,” the head of state said when opening the enterprise.
He noted that 5,000 jobs should be created in Kolomyia by 2021 and now their number is 800. In addition, investors will provide wages equal to UAH 8,000.
“I would like to thank Leoni, which was one of the first to believe in Ukraine, the first to vote for the future of Ukraine with dollars, euros, creating future jobs, providing new taxes in the territorial communities, believing that Ukraine is competitive and efficient for investors,” Poroshenko said.
KYIV. Oct 2 (Interfax-Ukraine) – The volume of exports of computer and information services from Ukraine in January-June 2017 increased by 18.3%, to $1.256 billion compared with the same period in 2016.
According to the press service of the European Business Association (EBA), thus, in terms of export earnings growth in the first half of the year, the IT industry ranked third in the export structure. At the same time, the volume of tax revenues from the IT sector to the national budget grew by 32.9% against the similar figure of last year and amounted to UAH 3.69 million.
“In the first half of 2017, the industry of information and computer services in Ukraine continues to show a steady and stable growth in terms of exports of high-tech solutions and tax revenues to the budget,” a statement reads.
The growth in the main indicators of the IT sector is primarily due to a 7% rise in the number of specialists in the top 50 largest players in the industry (according to the dou.ua portal) in January-June 2017, the adoption of bill No. 4496 on simplification of exports of services at the end of 2016 and a relative political and legislative stability in the country.
“At present the IT industry is a driver of the growth of the Ukrainian economy and a component of the promotion of our state as a high-tech country in the international arena. Starting from 2013, the industry demonstrates a stable growth in exports and in the first half of this year it ranked third in terms of growth in foreign currency earnings,” Executive Director of the EBA IT Committee Kostiantyn Vasiuk said.
