Debt Management Office of the Year CEE

Despite a surprise high-level resignation, Ukraine has managed to absorb the shocks from Covid-19

Ukraine’s debt management office has managed to pull together the finances from international and local investors and the official sector to deal with a sharp rise in the deficit, which widened from 2.1% to 7.5% of GDP —equivalent to Hrv200bn ($7bn).

Notably, Ukraine managed to pull off one of the most impressive emerging market bond issuances of the year, despite battling uncertainty around the pandemic and the country’s internal institutions.

On the back of former governor Yakiv Smoliy’s resignation and the planned Eurobond issuance in early July being pulled, Ukraine and the DMO managed to regain investor confidence and raised $2bn at 7.25%.

“Ukraine did not have a crisis of funding,” says government commissioner for public debt management Yuriy Butsa. “We used positive market conditions in January to refinance our external debt needs with a 10 year euro-denominated Eurobond… We did pull off our planned Eurobond issuance in July, following the surprise news of governor of the central bank Yakiv Smoliy resigning... It was unusual for us to retract the deal but it was the only reasonable decision.”

The country’s ability to secure IMF funding in the form of a $5bn Standby Agreement despite a number of challenges, including Ukraine’s anti-corruption and reform agendas, is testament to the DMO’s hard work.

A pragmatic and carefully considered debt management strategy has prevented the crossover frontier-emerging market from falling into the grips of a total crisis. Economic recovery is expected to reach 4.6% next year, after contracting by 4.8% in 2020.

“Ultimately, 2020 was a rocky year for Ukraine, but we came into a problematic period fully prepared and prevented economic difficulty from turning into a full-blown financial crisis,” Butsa says. “Ukraine is an example to other emerging market countries that classic prudent fiscal policies work.”