The Ministry of Finance of Ukraine has submitted information on additional floatation of foreign currency bonds in the amount of $ 350 million for a period of 10 years. It would be good, if not one «but» the percentage is 9.75% APR. That is our government, reporting about the success of economic policy, lends money under «garbage interest rate for countries that are teetering on the brink of default
It is reported by the Wave.
This is the highest percentage, which occupied the country. For comparison I give the interest rates for Ukrainian Eurobonds, which are traded on the market:
- 5-year bonds (code 1Z2HM) 2015. Issued under the state guarantees of the United States — 1,471%
- 7-year bonds (code A18U3G) 2015, released independently — 7,75%
- 8-year bonds (code A18U3J) 2015, released independently — 7,75%
- 9-year bonds (code A18U3L) 2015 — 7,75%
- 10-year bonds (code A18U3N) 2015 — 7,75%
- 5-year bonds (code a186zy) 2016. Issued under the state guarantees of the United States — 1,847%
- 10-year bonds (A18U3Q) 2016 7,75%
- 12-year bonds (code A19PNV) 2017 — 7,375%
- Ukrainian bonds 2018 (maturity 2024, code A2RTRP), a total of $ 750 million 8,994%
- Ukrainian bonds 2018 (maturing in 2028) for a total of 1.25 billion 9.75% interest
At that time, as the current government and the President loud and clear on economic growth, the country’s ability to pay the bills is much worse than in 2015.
What is the need for such unprofitable loans?
Our country has a huge external debt, the peak of payments which accounts for the 2019-21. Therefore, Ukraine needs additional financing. However, such high interest rates borrowing is not allow to fully implement the commitments it would only postpone the maturity date, reducing the size of external debt.
Where you can obtain funds at a lower interest?
Less money is the EU, IMF, USA. But they all make demands for the reform of the state system, the fight against corruption, in the end, life means.
However, the negotiations are moving very slowly, we could observe throughout 2018.
Why so urgently need money? In August of last year, Ukraine borrowed $ 725 million in six months at the rate of 9% per annum. And just two months later took another 750 million for 5 years at 9%, and another 1.25 billion under a 9.75% interest for 10 years. And finally, in 2019 has decided to increase in the amount of $ 350 million.
Game of populism before the elections
We have the election and traditionally the government demonstrates that «the predecessors» called «improve today» — big pensions, the growth of payments to beneficiaries — those who actively go to the polls. What happens: distribute money to the population and occupy about the same amount in foreign markets.
But remember, if today the pensioner went to meet him, tomorrow, he will give twice as much. And for this, you will need to take 350 million «body debt» and nearly the same percentage of taxes… citizens who could go on the pensions of the pensioners.
I wonder, for example, that 350 million could not be hold in customs clearance EuroBLECH in the amount brought 13.6 billion. It is at the current rate neither more nor less, and 503 million dollars. But the lion’s share of this amount, decided just to give away, what joy was announced by President Poroshenko in his Twitter.
Why can’t we multiply money by investing?
Investors are attracted to Ukraine, no one wants to invest where there is corruption at Pertra. And since investment flows is extremely small, the interest on the debt will be collected with the taxes of ordinary Ukrainians, who could go to the same pension and other social payments.
We will remind, the next tranche from the IMF was in jeopardy.
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