Oct 20 Prime Minister Yulia Tymoshenko expressed
confidence on Monday that talks with the International Monetary
Fund would prove successful and that Ukraine would secure
"substantial" financial assistance. [UA-M]
Officials have suggested the IMF could lend Ukraine a sum
ranging from $10-14 billion.
Following are key facts about why Ukraine is vulnerable to
heightened risk aversion among international investors.
* Ukraine has been plagued by political turbulence since
"Orange Revolution" protests in 2004 brought to power President
Viktor Yushchenko and a team committed to moving closer to the
West and joining NATO and the European Union.
Rows pitting Yushchenko against his former ally Yulia
Tymoshenko, who twice served as his prime minister, undermined
the "Orange" camp and brought down governments. The president
dissolved parliament this month and called a December
parliamentary election, the third in as many years.
* Upheaval -- and trouble forming a stable ruling coalition
-- reflect Ukraine's longstanding division into the nationalist
west and centre, which looks to the EU and United States, and
the Russian-speaking east and south, friendlier towards Moscow.
* Relations with Russia, bumpy throughout the post-Soviet
period, have sunk to unprecedented lows over Yushchenko's
denunciation of Moscow's military intervention in Georgia.
Ukraine depends heavily on Moscow for energy supplies.
* The hryvnia currency hit an all-time low of 5.9/$ on Oct.
8, weakened by growing global risk aversion and regional
tensions after Russia's conflict with Georgia.
* In mid-2008 the hryvnia had strengthened as far 4.5/$,
after the central bank abandoned a policy of keeping it in a
corridor of 5.00-5.06 per dollar within a 4.95-5.25 band.
* The central bank's council and executive board have sent
mixed messages about future actions and clashed in May over
revaluing the hryvnia's official rate. The board appears to take
less notice of the currency band, set by the council.
* The central bank has said foreign exchange reserves as of
the end of September at $37.5 billion covered 3.7 months of
* The current account deficit was running at 7.9 percent of
GDP in the first half of this year, up from 4.2 percent in 2007.
* Analysts based outside Ukraine forecast its current
account deficit at $21-25 billion, or 10-12 percent of gross
domestic product, by year-end; Ukraine-based analysts give lower
forecasts of about 6 percent of GDP.
* Prices for Ukraine's steel exports are forecast to drop,
while Russia's Gazprom has suggested next year's price for gas
imports could soar to $400 per 1,000 cubic metres from $179.50
* The central bank risks encouraging imports and further
widening the trade gap if it supports the hryvnia. However,
letting it float would remove an important anchor for domestic
and foreign businesses in Ukraine's export-driven economy.
* Many people hold debt in foreign currency and would have
to pay more to service it if the hryvnia weakened.
* Consumers are extremely sensitive to currency movements --
they lost savings when the Soviet Union collapsed and again
through hyper inflation and a currency crisis in the 1990s that
more than halved the hryvnia's value to about 4/$ and beyond.
* Ukraine was forced to restructure its debts in 2000 and
made the final payments on that restructuring just last year.
Ukraine's foreign debt totalled just over $100 billion as of
July 1, of which about $15 billion was government debt.
* The central bank has said it expects banking sector debt
worth $1-1.2 billion to mature in the final quarter of this
* Citi analysts estimate Ukraine's 2009 external financing
requirement to be $55-66 billion, of which $32-40 billion is in
the private sector. Foreign banks own 40-42 percent of total
banking assets and 25 percent of short-term banking debt is owed
to parent banks.
(Compiled by Sabina Zawadzki; Editing by Ruth Pitchford)