By KYIV. Sept 15 (Interfax-Ukraine) – The potential for increasing borrowing on the domestic bond market remains, however, financing additional expenses of the 2023 state budget will require consultations with international partners within the framework of the International Monetary Fund (IMF) program, the goal remains to avoid monetary financing, said Governor of the National Bank of Ukraine (NBU) Andriy Pyshnyy.
“In fact, the National Bank understands the urgent need to finance the defense budget. These consultations with us, one way or another, took place. We are now within the framework of the agreements and the concept that we built over the course of the year during our relationship with the government,” he said at the briefing on Thursday.
Pyshnyy pointed out that “the potential of the domestic debt market has not been exhausted,” emphasizing that the NBU noted changes in demand “which has appeared even for long-term instruments offered by the Ministry of Finance.”
As reported, the Ukrainian government proposes to increase state budget expenditures for 2023 by UAH 328.5 billion, including an additional UAH 302.6 billion for the security and defense sector. The funds are expected to be allocated by increasing domestic borrowing by UAH 207.6 billion and external borrowing by UAH 91.2 billion, including $3.3 billion from the United States, as well as reducing state budget expenses by UAH 11.4 billion and increasing revenues by UAH 26.1 billion.
The head of the National Bank recalled that within the framework of the program with the IMF, in the event of an additional need, there is a certain hierarchy of sources through which it is covered. In his opinion, the relevant dialogue and negotiations “can and should” take place within the framework of consultations with international partners.
“We expect this dialogue during the second review (of the program), which is scheduled for the end of September and the beginning of October,” Pyshnyy summed up.
Representatives of the National Bank noted that thanks to cooperation with the Ministry of Finance, borrowing volumes since the beginning of the year have reached a level that ensured 100% rollover for the year as a whole, and net financing already amounts to UAH 4 billion.
“There is, of course, potential. We have seen a good contribution to debt raising from benchmark bonds, which account for more than 60% of the overall structure of hryvnia raisings. They have not yet fully exhausted themselves. There is potential somewhere around UAH 10-15 billion reserve,” added Deputy Governor of the NBU Yuriy Heletiy.
According to him, banks began to invest in these instruments not only to use them in the formation of required reserves, but also based on their high profitability.
