January 26, 2015 / 9:21 AM / 4 years ago

Ukraine to issue $2 billion in local bonds to support Naftogaz

KIEV, Jan 26 (Reuters) - Ukraine will issue domestic bonds amounting to 31.5 billion hryvnia ($2 billion) to support state energy firm Naftogaz, a document posted on the government’s website said on Monday.

Kiev, which is mired in an economic crisis, is under pressure to reform Naftogaz, whose financial deficit is significantly larger than the national budget deficit and requires government support to pay its bills.

As in previous such transactions, the new bonds are likely to be bought by the central bank to provide cash for Naftogaz to fund its gas imports, a further strain on dwindling foreign currency reserves

Last year Ukraine issued 96.6 billion hryvnia ($6.18 billion) in local bonds to support Naftogaz, increasing internal debt.

Central bank reserves are at a ten-year-low of $7.5 billion — barely enough to cover five weeks of imports partly due to payments to Naftogaz last year. On top of regular gas payments, the company paid $3.1 billion to Russia’s Gazprom in late 2014 for past gas debts.

$1 = 15.6200 hryvnias Reporting by Natalia Zinets; Writing by Alessandra Prentice; Editing by Andrew Heavens

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