I would like to believe that President Volodymyr Zelensky has already realized that Finance Minister Oksana Markarova has “played too long” with government bonds. In turn, ex-Minister of Finance Natalie Jaresko, looking with agape, what her former deputy is doing now, thinks: "Oh, so there was such an option." Yes, financial analysts and stockbrokers see that such active borrowing in the Ukrainian debt market with record high-interest rates on government bonds and Eurobonds of Ukraine for European stock markets is comparable to the obvious signs of a financial pyramid, the fate of which is an inevitable collapse.
In addition, the Ministry of Finance itself is forced to admit that during 2019, the total debt of Ukraine in dollar terms increased by $ 6.04 billion (7.7%) and amounted to $ 84.36 billion as of December 31, 2019.
And now, everyone cares about how close we are to the collapse of this pyramid? Of course, at this stage, the risks of the pyramid collapse are very high. The D-day depends solely on the leadership of the Ministry of Finance and the National Bank (NBU), as they manually manage this process.
Tens of billions of “hot” money come to us in the hope that one might get profits easily and effortlessly. But who will suffer first of all from the collapse of the government bonds’ financial pyramid? Do not even doubt it - these would be Ukrainian ordinary taxpayers. And we need to be ready for this now, as there are plenty of serious reasons for the deep crisis in our bond market, including economic imbalances and growing debts.
Plus, from the not too distant past, echoes of major mistakes of ex-Minister of Finance of Ukraine Natalie Jaresko reach us. I recall only one fact from 2015: she agreed to restructure our debt on the basis of a new issue of government bonds with special conditions, or the so-called GDP-warrants, which involves payments based on the calculation and accounting for real growth (without inflation) of Ukraine’s GDP.
Thus, if GDP growth is from 3% to 4%, then payments will amount to 15% of GDP growth. If the growth is above 4%, then Ukraine is already paying 40% of the increase above 4% of GDP. Moreover, the calculation of the first payment began from the past, 2019, but payment for this year will go in 2021, as already stated by Dmytro Sologub, the deputy head of the National Bank.
Well, now it’s clear that GDP growth of 4% or more is unprofitable for us because we will have to give the lion's share of this economic growth to the holders of these Ukrainian government bonds. Ministry of Finance drove us into some kind of absolute absurdity! And the Ukrainian economy cannot develop without solving this enormous problem.
However, our financial authorities do not seem to notice this problem and continue to actively increase public debt by placing the next issues of government bonds and Eurobonds. By the way, last week, during a talk show, Finance Minister Oksana Markarova even boasted that she began to place Ukrainian bonds with a long end.
January 23, 2020, the Ministry of Finance placed 10-year Eurobonds worth 1.25 billion EUR at a rate of 4.375% (!) per annum with a final maturity of January 27, 2030. And this is in conditions when Europe has long forgotten about such record high-interest rates, moreover, for example, Germany placed its 30-year bonds with negative yield (the indicator was minus 0.11% per annum).
Of course, due to such record-high interest rates on the yield on Ukrainian government bonds, many foreign speculators simply demolish the tower. For example, the number of applications for the acquisition of Ukrainian Eurobonds of a new issue in the amount of 1.25 billion EUR at a rate of 4.375% amounted to more than 7 billion EUR from more than 350 investors from around the world. And also on January 28, the Ministry of Finance has traditionally offered for placement the next hryvnia government bonds with a maturity of 70 days, 420 days, 707 days, and 2,674 days.
Well, let me remind you of our enormous debts: in 2019, the Ministry of Finance with the help of government bonds took 227.6 billion UAH (9,2 billion USD), $ 4.3 billion USD, and 387 million EUR!
But for now, in 2020, we need to pay more than 400 billion UAH 916 billion USD) in public debt. We will have to forget about health, education, pensions, and lower utility bills. The minister knows exactly how to make the most money from the placement of government bonds, and the head of the NBU manually raises and lowers the hryvnia exchange rate in the interests of the Finance Minister. At the same time, all management of state corporations is given to supervisory boards consisting of foreign citizens.