Since May, the value of Natalie Jaresko (American-born Ukrainian investment banker who served as Ukraine's Minister of Finance from December 2014 until April 2016, - ed.) VRI bonds has already increased by more than 50%. And taking into account the planned economic growth of 3.8-3.9% of GDP by the end of 2019, we will need to pay about 220-230 million dollars for these bonds in 2021.
At the same time, if in 2020 the economy of Ukraine reaches 5% growth, then payments will amount to more than 1 billion in 2022.
Looking at this chart, I have no doubt that these bonds will come out above 100% of their value in December as a reaction to the forecast economic growth of 4.2% in the III quarter. Further doing nothing with these bonds provokes national security problems, because payments will have to be made from the country's budget, which, obviously, will unbalance state finances.
Therefore, the state has several options:
- Try to buy back part or all of these bonds. But, obviously, Ukraine was already late with the ransom. It had to do it this year. Moreover, the buyback requires new resources, and the budget approved for 2020 involves borrowing only to cover direct payments.
Moreover, serious payments are to be made in 2020 (some of them are called peak payments). But in general, in my estimation, Ukraine will now pay the same every year. Therefore, it is necessary to additionally attract 3-4 billion Eurobonds for such an operation.
- To declare default on these bonds. In any case, we will bear the risks from default or from huge payments in case of economic growth.
- Agree with creditors to change the terms of VRI bonds (change the formula).
- Agree on a change of bonds to interest. For example, at the same rate of 7.75 (which Ukraine now serves as part of the restructuring). But, most likely, then Ukraine will have to pay part of the interest accruing on these bonds.
In any case, it is necessary to resolve the issue. I hope Minister of Finance Oksana Markarova is engaged in this.
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