National bank of ukraine’s official rates as of 17/07/19
Source: National Bank of Ukraine
Reaching a majority by the pro-presidential Servant of the People Party in the Verkhovna Rada, Ukraine’s parliament, or creation by it of an ideological coalition will let it quickly form a government, negotiate a new program with the International Monetary Fund (IMF) and unlock deep reforms in Ukraine, which will facilitate economic growth. Such a base-case scenario of the possible election results was described by analysts of Bank of America MerrillLynch (BoAML).
“Key political party programs suggest that the next Rada will be open to deep reforms, which were not feasible previously,” they say I an outlook published last week pending the snap parliamentary elections in Ukraine, scheduled for July 21.
Among such reforms, the analysts point to the launch of a land market with the effect of accelerating GDP growth (which is now potentially estimated at 3%) by at least 1 percentage point (pp) and an additional $1-2 billion in investment annually, as well as switching to exit capital tax, which can add to the growth of another 1 pp.
The BoAML believes that an agreement on a new program with the IMF for four years in the amount of $8-9 billion could be reached in October-November. The lack of a program remains a key risk, but in the face of large external payments in the coming years, it will be difficult for Ukraine to cope with them without cooperating with the Fund, the outlook says. In the case of a successful new program with the IMF by the end of Volodymyr Zelensky’s presidential term, Ukraine’s international reserves could increase to $25 billion, the analysts say.
According to them, the growth of Ukraine’s economy in 2019 could reach 3.2%, which will allow investors in 2021 to receive the first, albeit small, payments on the so-called GDP warrants (value recovery instruments), and this will become an important trigger for the purchase of such securities. The BoAML estimates their fair value at around 86% of the nominal value based on conservative growth and volatility assumptions, whereas recently they are quoted slightly above 70%.
As for Ukraine’s eurobonds, the analysts retain an ‘overweight’ recommendation on them: despite a significant increase in prices that has already occurred since the beginning of this year, they still have the potential to a further cuts in rates. The authors of the outlook also point to a continuing high interest in the government bonds market, where the rates on six-month government bonds are at about 17.5% with a projected average annual inflation of 8% and an expected decrease to 6% next year.
According to the outlook, the National Bank may lower its key refinancing rate this year to 16% per annum and further to 14% per annum next year with the average annual hryvnia exchange rate of about UAH 27 per U.S. dollar this year and UAH 27.5 per U.S. dollar next year.
BoAML analysts say that in 2019-2020, Ukraine will be able to achieve the upgrading of its credit rating from ‘B-‘ to ‘B+.’ In future, its securities could be traded somewhere at the level of Egyptian securities. “We think Ukraine could trade much tighter to Egypt in time, although a long-term commitment to an IMF programme and reforms would be required first,” they said.
Ukrzaliznytsia (Kyiv) has saved energy resources worth more than $6 million (UAH 165 million) since the beginning of 2019 thanks to the implementation of the energy and resource saving program for railway transport for 2019-2020 and the purchase of modern rolling stock.
According to the press service of the company, in particular, electricity consumption in the first quarter of 2019 was reduced by almost 30 million kWh, diesel fuel by about 4,000 tonnes, natural gas by more than 400,000 cubic meters.
“Thanks to the acquisition and commissioning of General Electric locomotives, over the five months some 1,970 tonnes of diesel fuel was saved, which reduced the cost of purchasing fuel by almost UAH 58 million. Thanks to the elimination of energy intensive train speed limits, 108 tonnes of diesel fuel worth UAH 3 million and 3,574 kWh of electricity worth almost UAH 7.2 million were saved,” Ukrzaliznytsia said.
In addition, according to the company, energy saving was also promoted by the work of traction energy laboratory wagons, which made 243 research trips.
Nika-Tera sea terminal (Mykolaiv) in the 2018/2019 marketing year (MY, July-June) handled 4.7 million tonnes of grain and leguminous crops, which is 88% more compared to the previous MY.
According to a report on Nika-Tera’s website, in the 2018/2019 MY the port grain transshipment items included corn (50%), wheat (34%), soybeans (8%), barley (5%), and peas (3%).
In addition, during this period, the terminal shipped 350,000 tonnes of soybeans, which is seven times more than the figure for the same period of the last marketing year.
Some 240 vessels with grain and leguminous crops were shipped for export.
During the period from July 2018 to June 2019, Nika-Tera handled 395 vessels, and the volume of transshipment amounted to 7.25 million tonnes of cargo.
As reported, in 2018 Nika-Tera seaport handled 335 vessels, transshipping 5.84 million tonnes of freight, which is 40% more than in 2017.
Nika-Tera is a modern highly mechanized marine terminal, part of Group DF’s port business.
GRAIN, LEGUMINOUS CROPS, NIKA-TERA, SEA TERMINAL, TRANSSHIPMENT
Ukraine’s Ministry of Economic Development and Trade estimates the need for investment in a project to develop production capacity of the Novokostiantynivske uranium ore deposit (SE VostGOK, also SkhidGZK) in Kirovohrad region at UAH 2.9 billion, including UAH 1.2 billion from the national budget and another UAH 1.7 billion are the enterprise’s own funds.
According to the ministry’s press release, VostGOK had already allocated UAH 0.35 billion under the project as of January 1, 2019.
The ministry expects that the project will increase the production of uranium concentrate from the raw materials mined at the field by 2.1 times, from 336 tonnes in 2018 to 701 tonnes in 2021. It will also let create 200 new jobs.
Ukraine saw a record high export of 50.4 million tonnes of grain, leguminous crops and flour in the 2018/2019 marketing year (MY, July 2018 through June 2019), which was 23% more than on the same date of the previous MY.
The Agrarian Policy and Food Ministry reported with reference to the State Fiscal Service, that maize exports totaled 29.82 million tonnes, shipments of wheat and wheat-and-rye blends abroad totaled 15.6 million tonnes, while 3.7 million tonnes of barley and 87,800 tonnes of rye were exported during the reporting period.
Some 301,280 tonnes of flour were also exported by the said date.
As reported, Ukraine in MY 2017/2018 exported 40.9 million tonnes of grain and flour.
According to the Agrarian Policy and Food Ministry, Ukraine exported 1 million tonnes of grain and leguminous crops and 10,500 tonnes of flour from July 1, when the new 2019/2020 marketing year started, to July 12, 2019.
