Business news from Ukraine

JAPAN RATING AND INVESTMENT INFORMATION UPGRADES UKRAINE’S FOREIGN CURRENCY RATING

Japan Rating and Investment Information, Inc. (R&I) has upgraded Ukraine’s foreign currency issuer rating from B to B+, rating outlook is stable.

“When fiscal consolidation efforts to date and enhanced resilience to external shocks are also taken into account, economic and fiscal conditions are expected to recover in 2021 and beyond,” R&I said in a Thursday press release.

R&I said that the International Monetary Fund (IMF) financial support for Ukraine, together with loans from the World Bank and the European Union (EU), will help stabilize the government’s funding, which R&I views favorably.

R&I believes that the improved political and social stability under the leadership of President Volodymyr Zelensky will allow the government to focus on rebuilding the economy.

R&I said that among other positive moments is that foreign reserves are on the rise, standing at $28.8 billion as of end-July 2020, which covers 4.9 months of imports. Gross external debt is declining as a percentage of GDP. As of end-March 2020, the ratio was 75.8%. With external debt maturing within one year falling to 29.3% of GDP, the short-term external debt to foreign reserves ratio declined to around 1.6x from more than 2x seen until the previous year.

There is little concern over the government’s foreign currency liquidity, R&I said.

The banking sector has improved profitability. Supported by growth in deposits, the sector also maintains stability on the liquidity front.

“R&I will follow their [government and National Bank of Ukraine’s] efforts to ensure financial stability, as the impact of the coronavirus is anticipated to emerge going forward,” the agency said.

In R&I’s view, containing infections, reinforcing the healthcare system and rebuilding the economy are top priorities for the government’s fiscal policy.

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UKRAINE RELAXES PURCHASE OF FOREIGN CURRENCY FOR NONRESIDENTS

The National Bank of Ukraine (NBU) has relaxed the rules of buying foreign currency by nonresidents to return foreign investment abroad after transactions with government domestic loan bonds, the central bank has reported on its website. The respective initiative was approved by resolution No. 100 of the central bank’s board amending certain legal acts of the NBU dated September 18, 2018. The document came into force on September 20, with the exception of certain clauses, which will become effective on November 1, 2018. “Nonresidents for the purchase of foreign currency after operations with government bonds will need to submit the short list of documents as possible,” the NBU said in the report.
In particular, the resolution specifies the rules of settlements under operations with government domestic loan bonds, where a nonresident is a party: transactions with banks and nonresidents can be carried out without restrictions, operations with other counterparties can be carried out only on the stock exchange with settlements using the “delivery of securities against payment” principle.
In addition, the rules of servicing the operations on the government domestic loan bonds placement among the clients of primary dealers (broker contracts) are defined, which provides access to the primary government domestic loan bonds market for private investors.
The mechanism for servicing refinancing operations with a pool of assets as collateral has also been regulated. The procedure for conducting blocking operations for government domestic loan bonds under these transactions has been determined, and the NBU is given the opportunity to take into account the securities of banks that are deposited as collateral in favor of the central bank.

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