Ukraine plans to increase its Eurobond issuance this year and wants to make its currency fully convertible as soon as its turbulent politics settle down, senior officials said on Sunday.
The government will increase its issuance of Eurobonds this year to $900 million from the $700 million planned in the budget, Deputy Finance Minister Andriy Kravets told Reuters on the fringes of the EBRD annual meeting in Kazan, Russia.
Ukraine has been hamstrung by a drawn out political crisis this year pitting President Viktor Yushchenko against Prime Minister Viktor Yanukovich, but the two have broken the deadlock by agreeing to hold an early general election.
Original plans to issue a Eurobond in May or June may slip, and Kravets said it would now be "impossible" to place the offering this month. But political uncertainty has not closed the window to international issuance entirely, he added.
"Now the situation on the market for Ukraine is good-we understand there is no political influence on the possibility to find money at a good price," Kravets told Reuters, adding that the Eurobonds would be issued in one tranche.
He declined to comment on which bank would lead manage the offering. The increase comes after the amount Ukraine expects to borrow from the World Bank this year fell to $300 million from $500 million.
Ukraine plans to borrow a total of $1.9 billion this year to finance its budget needs, of which it will raise $1.2 billion abroad and a further $750 million on the domestic market. The government also plans to raise up to $2 billion from privatisations, including that of state-controlled Ukrtelecom and Odessa port, and further debt issuance plans will depend on those deals, Kravets said.
Oleksandr Savchenko, deputy chairman of the National Bank of Ukraine, told the EBRD meeting the country would achieve full convertibility of its hryvnia currency within a year and a half and investors should prepare for the currency to become more freely floating.
"In one to one-and-a-half years the Ukrainian hryvnia will be a fully convertible currency-like the Russian rouble and the Kazakh tenge," said Savchenko.
The National Bank of Ukraine currently keeps the hryvnia in a narrow range around 5.05 to the dollar, justifying its stance by the fact that most foreign trade is cleared in the U.S. currency.
"The 5.05 exchange rate has been stable for two years, and we believe this will continue," said Savchenko. "But I would like to stress that change is coming and the exchange rate will not be stable for ever."
He also noted that legislation to create partial convertibility was being held up by Ukraine's political crisis, with no final date yet confirmed for the parliamentary election.
"Our policy is that in an unstable political situation, the currency should be stable," he said. "As soon as we understand that a political consensus is found, we will change our policy. Change will come."