Dangerously chosen direction

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The growing internal debt can depreciate гривню in the fall to 8-10 UAH/1 dollars

The decision of Cabinet of Ministers on increase in an authorized capital of NAK "Neftegaz of Ukraine" on 18,6 billion UAH by issue of the state securities and repayment by their National bank of Ukraine was apprehended very ambiguously both politicians, and experts. The share of the bonds of a domestic state loan (BDSL) in a portfolio of NBU and so grows. From January to June OVGZ volume in reserves of NBU increased from 8,6 billion UAH to 28,6 billion UAH. Now can happen so that the total amount of an internal debt (for today - over 50 billion UAH) will grow by a third.

In NAKrescue


To help the largest state energy company to solve financial problems it is necessary, the constant increase in loans can aggravate a situation only. Even to the nonprofessional it is clear that the debt way doesn't promote elimination of those imbalances in power and fiscal policy of the state which led to emergence and long existence of problems of non-payments and constant debts to suppliers in gas branch of Ukraine.

Besides, it is necessary to pay attention also to that fact that frequent use of issue resources for the solution of problems of NAK "Neftegaz of Ukraine" serves as an additional factor of a warming up of an inflationary situation. We will remember that, according to Victor Yushchenko, in June, 2009 he charged to National bank to carry out issue to hryvnia for the purpose of receiving means for calculations of National joint stock company "Neftegaz of Ukraine" with Russian "Gazprom" for the natural gas put in May of 3,8 billion UAH

In the same way, as well as at the above-named order of the President, the legal basis of the decision made by the Cabinet about increase in an authorized capital looks doubtful. It contradicts, at least, to the law on the state budget for 2009. In fact, there is a translation process of the budget deficit connected with a fiscal component, in a plain duty of the government before National bank. Unfortunately, such position isn't neither new, nor effective. It helps to patch holes of the current budget only. Consequences for budgets of future periods at preservation of this approach will be very deplorable. And it is a little reasons for optimism:such behavior of Cabinet of Ministers relies on the Ukrainian tradition - constantly to live on credit.

Not lyrical digression


The tradition to live beyond means in mass consciousness of Ukrainians appeared relatively recently - in 90-е years. Sale of the state ownership, actually full chaos in the legislation, privatization and the other "delights" of a transition period appearing as though from anywhere money imparted to people very prevratny ideas of mechanisms of production and ways of receiving profit.

Work stopped being value. Goods became value. And existence of these or those things in property - a status indicator. Even when opportunity to confirm this status with something other wasn't. As a result appeared "crazy" money quickly disappeared. In the majority they weren't spent neither for construction of new plants, nor for science development, for creation of ingenious works of art. They were simply eaten and spent on drink.

After the short period of relative tranquillity Ukraine turned into the proving ground for various risk investments from widely known world exchange and financial speculators. Also to the country the stream of the short credits directed, first of all, on the consumer market rushed. People accustomed to live on credit, telling them fascinating stories about good life from screens of TVs, pages of newspapers and magazines, air of FM-of stations.

At the same time with increase in credit dependence of citizens and growth of negative balance of the foreign trade balance deficiency of the state budget grew.

We will remind that credit money was spent just mainly for import goods: analogs of a domestic production weren't, or they were forced out by foreign competitors. As in Ukraine isn't present and there was no policy of maintenance of the producer, it became more favorable to sell, than to make. As a result, money catastrophically didn't suffice not only on VAT compensation on export, but also on the escalating volume of social payments. Since 2002 and to this day the state lives on credit, and this debt constantly grows.

Geometrical progression in a germ


Mentioning a public debt, now, as a rule, mean a debt external. With it politicians, journalists, experts often operate.On the one hand, it is seemingly justified, especially if to judge on a ratio of volumes of internal and external debts. On the other hand, while to an internal debt of very few people pays attention, it grows. And for the last year simply fantastic rates - over 150% a year.

The size of an internal debt of Ukraine with 2004-го till May, 2009


This gain can be accelerated if Ukraine pays for gas or certain other strategic import by issue money. Judging by the last actions of the government after possibility of attraction of external loans besides trenches of the IMF was significantly reduced (or, we will tell directly, almost I disappeared), the Cabinet of Ministers paid attention to internal resources. And as to increase fiscal pressure indefinitely it is impossible, and гривню only the National bank directly can devaluate, the state budget and an internal debt appeared hostages of a critical situation with available funds.

If to address directly to structure of the most internal debt, it is possible to notice that at present the most part of a debt is concentrated in debts before NBU. In comparison with the indicators given in the table (the Ministry of Finance yet doesn't give fresher data), the debt sum for the beginning of July, 2009 increased almost three times - to 28,6 billion UAH. As in bonds with rather remote maturity date - 7 and 5 years, and medium-term - three-year-old.

Thus it should be noted that the Ministry of Finance increased volumes of primary placement of the state securities, staking on short-term bonds (with maturity dates three and six months) and offering profitability at the level of 21-22% which is slightly higher, than the current rates in the credit market that is the indirect certificate of an unfavourable fiscal situation.

"Passing" debts


Except directly plain internal duty, grows and the internal debt guaranteed by the state. It, as a rule, a debt of the State Banks and corporations for which the government was charged.

At present its most part is the share of obligations to two state banks - Sberbank and Ukreksimbank. These obligations also promptly increase. In July only NAK "Neftegaz of Ukraine" was attracted with 1 billion UAH of proceeds of credit of Ukreksimbank for repayment of the next payment for the natural gas put by "Gazprom".

Except direct debts of the government, in Ukraine at present there is rather large volume of municipal debts - both external, and internal. Debts of the cities and areas are estimated in tens and hundred millions hryvnias.

For example, the Lvov City Council in 2007-2008 made the decision on issue of bonds of a domestic loan for total amount of 292 million UAH, the Kiev and Kharkov City Councils - for the sum of 100 million UAH each, Donetsk City Council - on 45 million UAH in 2005 and on 50 million UAH in 2006, the Zaporozhye City Council - on 75 million UAH, the Lugansk City Council - on 29,3 million UAH

Practically all these securities have a maturity date of 5 years, and it is necessary to redeem them since 2010. Whether there will be in local budgets such sums - it isn't known. Probably, they should restructure loans or to ask for the help the Ministry of Finance. It, in turn, unconditionally, will be reflected in the size of an internal debt.

It isn't necessary to forget also and about an external municipal debt. According to the Ministry of Finance, only at Kiev the total external debt exceeds $1,1 billion. At Kharkov of debts on $100 million, at Odessa the sum of external debt exceeds 335 million UAH, Nikolaev has 13 million UAH. Which debt - external or internal - will be repaid first of all, now difficult to tell, but it is possible to assume that if the maturity date will fall on the same period, a priority, naturally, will be given to an external debt.

Forecast for tomorrow


What forecast for the near future? What expects us in the fall of 2009? Now difficult to give any accurate figures. Both political, and economic situations are very unstable. Most likely, the last year's deal when the sharp increase in internal debts of the state fell on the end of the year will repeat. Then the internal debt of Ukraine sharply grew - with 17 billion UAH ($3,5 billion at the rate of 5,05 UAH / $1) to 44,5 billion UAH ($5,8 billion at the rate of 7,5 UAH / $1, according to calculations of the Ministry of Finance).

OVGZ thus let-out the Ministry of Finance for the sum of 8,5 billion UAH at first were redeemed by commercial banks, and then (during one - two days) appeared on NBU accounts. Financial analysts defined such release of OVGZ as the hidden currency issue as the National bank actually financed sharply increased deficiency of the state budget.The main difference will consist what to count on loans in the foreign financial markets hardly it is necessary. Means, the increase in an internal debt can become the main mechanism of a covering of a budget deficit and calculations of the government for the current debts of the state corporations.

The majority of experts incline to thought that in the fall of 2009 devaluation to hryvnia will be not so considerable as in 2008 - the m, but nevertheless will occur. Forecasts at the rate fluctuate within 8-10 UAH / $1. Growth of tax revenues in the first - the second was caused quarters 2009 by a high share of advance payments that in the third - shouldn't be expected the fourth quarters. We will remind that in 2009 - the m, according to the plan of receipt of funds in the budget-2009, the Ministry of Finance has to attract about 70 billion UAH due to internal debt releases, and it actually a third of all income of treasury this year. Therefore, it is possible to assume that the government will continue practice of increase of an interest rate for bonds of a domestic state loan and will suggest NBU to redeem OVGZ. Most likely, it will be securities with a short maturity date in 3 and 6 months and with a long maturity date - 5 and 7 years.

Opinion of the professional


Sergey Kiselyov the expert of School of political analytics at National university "Kiyevo — Mogilyansky Academy"


The internal debt will gradually grow. The volume of the placed bonds of a domestic state loan since the beginning of year increased almost twice - from 29,2 billion to 50,7 billion UAH. And the National Bank share as owner of OVGZ for this period also sharply increased - from 29% to 59%.

Further growth of volumes of an internal debt will be promoted also by recapitalization of a number of banks, and systematic increase in authorized capitals of two state banks - Oshchadbank and Ukreksimbank.

At the same time in the itself tendency of growth of an internal debt isn't so critical. Set of the general (direct and guaranteed) a national debt now makes about 20% of gross domestic product. In many western countries this ratio is much higher. But main thing here: in - the first, reasonable use and control of use of borrowed funds, in - the second, control of the cost of service of a debt, in - the third, opportunity for restructuring and systematic repayment of debts.

Possibility of further devaluation to hryvnia for the fall remains though I would connect it not so much with a question of growth of an internal debt, how many with need of return of considerable volumes of external debts of commercial banks, and also with need of increase in volumes of bought gas for the Russian Federation.

Yury GAVRILECHKO

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