- EU-Ukraine Integration: Big Jumps in Food Exports, Gas Storage, and Migrant Labor
- China to Supply Trains for Kharkiv Metro
- Reuters Consensus: Interest Rate Cut Next Week
- Tourism Boosters: Flights Resume Today; Zelenskiy Proposes Visa Free for Chinese, ‘Arabs,’ Aussies, and Kiwis
Ukraine had the biggest jump in food exports to the EU of any country in the 12 months ending in January, reports the European Commission. Ukraine’s exports increased 21% y-o-y, adding €1.2 billion. During that one year period, Ukraine was the third largest supplier of food to the EU, selling €6.8 billion, accounting for 6% of the EU’s food imports. The top two were: Brazil, supplying €10.7 billion, or 9%; and the US supplying €10.1 billion, or 8%.
Foreign traders have tripled their volumes of natural gas stored y-o-y in western Ukraine’s ‘Customs Warehouse’ reservoirs reports Uktransgaz, the pipeline unit of Naftogaz. Increasingly comfortable with the 2-year-old low duty regime, foreign traders now have about one third of their 2 billion cubic meters in the system as ‘short haul transportation.’
“We are confident that this trend will continue in the coming months,” says Serhiy Oleksienko, Ukrtrangaz general director. “The level of filling of European gas storage facilities is rapidly approaching the maximum…in Austria today it is almost 85%, Germany – 84%, Italy – 68%. In Ukraine, this figure is 58%.”
The flow of Ukrainian workers back into Poland rose to 94,000, nearly triple the 34,000 recorded in April by Poland’s border guards, reports the Warsaw daily Rzeczpospolita. Krzysztof Inglot, head of the Personnel Service employment agency, estimates that as many as 400,000 Ukrainians left Poland in March, when the coronavirus threat first loomed. Last Monday, Polish ambassador Bartosz Cichocki agreed in Kyiv with Ukraine’s Deputy Foreign Minister Vasyl Bodnar to simplify procedures for Ukrainians to obtain work permits and to cross the border.
Ukrainians working in Poland earn about $5 an hour, four times the pay in Ukraine, writes the Warsaw Business Journal, drawing on figures from Personnel Service. Until the coronavirus recession hit, Ukrainian wages were growing by 20% a year and one quarter of Polish employers “declared that they would be willing to pay a Ukrainian employee more than a Pole, just to attract staff from the East.” Inglot of Personnel Service says that although “the staff deficit has ceased to be as severe as until recently…the Ukrainians who stayed in our country do not have to worry about the salary.”
“A new exodus is already gathering momentum,” Lesia Dubenko writes in an Atlantic Council essay about Ukrainian workers spurning low interest loans and public works programs unveiled this spring to encourage them to stay in Ukraine. Dubenko, an analyst the Kyiv NGO Europe without Barriers, writes: “The vast majority of Ukraine’s multi-million strong migrant labor workforce would rather return to the EU.” Noting Germany is recruiting guest workers from Eastern Europe, she writes that Kyiv must “tempt them to build their futures in Ukraine, without resorting to Soviet-style restrictions.”
China’s CRRC Tangshan Co. has won a contract to manufacture eight, 5-coach trains for Kharkiv’s expanding Metro system, reports Xinhua. The company has exported train coaches to Kazakhstan, Mongolia and Turkmenistan. Another branch of China Railway Construction Corporation, CRRC Zhuzhou Locomotive Co, is expected to bid this year on tender to provide Ukzalysnytsia with electric locomotives. The company’s BKG1 electric locomotives have been operated on Belarusian railways since 2012.
Ukraine’s economy probably contracted by 5% Jan-April, compared to the first four months of last year, estimates the Economic Development and Trade Ministry. The new state budget, revised at the start of the lockdown, is based on a 3.9% contraction for the year. Prime Minister Shmygal presented in the Rada a plan designed to stimulate a V-shaped recovery in the second half of this year.
Details of Ukraine’s agreement with the IMF are still under discussion, prior to an IMF Board meeting today. Gerry Rice, IMF spokesman, said in Washington: “The agreement on the Standby Agreement is the subject of discussions and should be approved by the Executive Council.”
With IMF approval of the $5 billion deal expected Tuesday, the National Bank of Ukraine is expected to cut the nation’s key interest rate Thursday. Of 15 Ukrainian analysts, polled by Reuters, six expect the rate to be cut from today’s 8% to 7.0%; five expect 7.5%; and four 6.5%. Oleksiy Blinov from Alfa-Bank Ukraine predicts a cut to 6.5%, citing “the favorable situation on the foreign exchange market and the need to stimulate economic recovery after the removal of quarantine restrictions.” The consensus forecast for May inflation, is 1.9% y-o-y, down from 2.1% in April.
State-owned Ukrgasbank is launching a home mortgage program in Kharkiv, offering loans at 8.8% per annum. With the Kharkiv city budget covering most of this interest, the real annual rate to borrowers will be 0.8%. These subsidized loans are only available for purchases of apartments from a local developer, Trest Zhilstroy-1.
Turkish Airlines restarts flights between Istanbul and Kyiv Boryspil on June 15. On June 24, SkyUp starts flights from Borsypil to Tirana, Albania and to four Italian cities: Bologna, Milan Bergamo, Rome Fiumincino, and Lamezia Terme in Calabria. Domestic travel started Friday from Boryspil, with UIA flying to Odesa and Windrose flying to Dnipro.
From Kyiv Sikorsky, Belavia, LOT, WizzAir and Motor Sich plan to re-start international flights on June 16. With virtually no revenue during the 3-month lockdown, the airports managers recorded a video addressed to the nation’s leadership asking that uniform landing fees be set for the entire nation. Alluding to their rival, Boryspil, Sikorsky managers argue that a big airport can impoverish smaller airports by artificially – and temporarily – cutting landing fees.
On the Move:
Former Finance Minister Oksana Markarova is returning to business. Last Tuesday, she registered a startup, Arshidata. Markarova writes on her Facebook page: “With a team with extensive experience in reform and working with global investors, we will work on stock market development through the Capital Market Development Foundation registered yesterday.” Markarova worked for five years at the Finance Ministry, stepping down as Minister three months ago.
- Kyiv-Odesa Flights Start Tomorrow
- Indoor Restaurant Seating Resumes Tomorrow
- Bureaucracy Keeps Migrant Workers from Working
- EU Gas Pain = Ukraine’s Gain
- Solar, Wind Companies Take Their Case to IMF
- Corona Recession Pulls Down Steel and Construction
Domestic air flights and indoor restaurant service are back, ending a nearly 3-month corona suspension, Prime Minister Shmygal announced last week. He confirmed that international flights re-start June 15.
Ukraine’s migrant workers, free spirits who often took casual jobs in the EU for less than the 90-day visa limit, increasing are desperate to get back to work, Politico Reports in a story headlined: “Ukraine’s trapped migrant workers look for roads back to Europe.” Workers are hitching rides west with long distance truckers, or using car pools set up on social media networks. “Ukrainians who were making a living in Europe and hurried back now find themselves stranded at home, cut off from their source of revenue as authorities enforce strict new rules about who is allowed out of the country,” reports Lily Hyde. Evgenij Kirichenko, founder of Gremi Personal recruitment agency for Polish employers says two thirds of Ukrainians who came home before the coronavirus lockdown now want to go back.
The government squeezed the migrant flow to a trickle by requiring a minimum three-month contract, medical insurance, housing and organized transport there and back. These new rules “strongly affects people’s rights to freedom of movement and right to leave the country,” says Pavlo Kravchuk, spokesman for Europe Without Borders, a Ukrainian NGO.
On July 6-7, Ryanair restarts flights between Ukraine and Italy, a major destination for Ukrainian elderly care workers. Flights will leave from Kyiv Boryspil, Kharkiv, Lviv and Odesa. Flights go to Bolognia, Catania (Sicily), Milan Bergamo, and Rome Fiumincino.
With a gas glut spreading in Europe, Naftogaz is well positioned to earn record rents storing EU gas in Ukraine’s western reservoirs, says Yuriy Vitrenko, the state company’s outgoing number two. Now covered under a duty free ‘warehouse’ regime, the reservoirs can hold 31 billion cubic meters. If Ukraine increases its own stocks from 18 bcm today to 21 bcm, last year’s pre-winter level, 10 bcm will be available for European traders to rent.
Natural Gas May Be the Next Commodity to Trade Below Zero headlines a story about the world gas glut – over supply caused by two mild winters, the corona recession and high production. “Unlike the oil market, there’s been no sign of a coordinated response to address the glut, meaning the fallout could be deeper and longer,” Bloomberg writes referring the production control pact between Russia and OPEC that has brought oil back to $40 a barrel. Noting that EU storage is at a season record of 73% of capacity, well above the 5-year average of 45%, Bloomberg warns: “The key factor is the lack of storage to absorb excess supply. Traders and analysts point to Europe as the first market likely to hit that crisis point [negative prices].”
Solar and wind energy companies have written to the IMF saying the government’s plan to lower energy tariffs complicates the country’s cooperation with the IMF and turns off future foreign investors. Faced with mounting electricity bills, the government has asked renewable operators to ‘voluntarily’ accept rate cuts of 10-20%. The investors wrote: “We are concerned that the government of Ukraine may be on verge of going beyond the mediated solution and seeking to impose punitive, retroactive unilateral changes to renewable energy sector contracts.” Talks have dragged on for nine months.
President Zelenskiy’s future ‘investment nannies’ are profiled in a Bloomberg article that describes the archetype as “a dedicated local minder to navigate the former Soviet republic’s often hair-raising bureaucracy.” Noting that Ukraine attracted only $2.4 billion in foreign direct investment last year, the article reports: “Zelenskiy wants to attract $7 billion from abroad in the next 18 months, trading tax breaks for thousands of new jobs in factories and logistics centers.” After interviewing Olga Magaletska, director of the ‘nanny’ project, the Bloomberg reporters conclude: “With strong agriculture, metals and engineering industries, Ukraine can be a place for multinational companies to expand facilities for food processing, spare parts and finished goods.”
Ukraine’s steel production was down 11% during the first five month of this year, compared to the January-May period of last year. According to Ukrmetalurgprom, the steelmakers association, the drops were: pig iron – 10%; steel – 11% and rolled metal – 18%. Last year, the combined total of these three categories was down about 2% over 2018.
Ukraine’s construction slump sharpened in April, with construction work dropping 16% y-o-y, reports the State Statistics Service. Residential was down 29%. During the first four months of the year, construction was down by 9%, to $1.3 billion. In Kyiv and Lviv regions, construction during the first four months was up 5%. In Kyiv city, the nation’s largest market, construction was down 9%, to $331 million.
On the Move:
Daniel Bilak, former chief investment adviser to the Prime Minister of Ukraine, joins Kinstellar as Senior Counsel. Bilak, a Canadian lawyer with almost 30 years work experience in Eastern Europe and Ukraine, most recently created and headed UkraineInvest, the government investment promotion agency.
Peter Teluk, most recently advisor on investment, privatization and governance to the Economy Minister, joins Sayenko Kharenko as partner. Teluk, an American lawyer, work for almost a decade as managing partner of the Kyiv office of Squire Patton Boggs.
- Millionaires Club: $250 million Goal for Bila Tservka Investments, €300 million from EIB to Winterize 1,000 Buildings, $110 million Hryvnia Bonds Sold at Auction
- Russia’s Gas Transit Drops in Half
- Corona Recession: Car Imports Cut in Half, IT up 20%
- Windrose Offers Kyiv Residents: Fly to Odesa for Lunch, Back to Kyiv for Dinner
Targeting foreign companies seeking to diversify supply chains from China, UFuture Holding is embarking on a 6-year project to attract 30 companies and $250 million in investment to Bila Tserkva Industrial Park, a 50-minute drive south of Kyiv’s Ring Road. Last month, Industrial Park Management became manager of Bila Tserkva 1 and Bila Tserkva 2 Industrial Parks. Six companies already operate in the parks, which cover a total of 70 hectares. With the parks expected to generate 4,000 jobs, the management company plans to work with local schools to upgrade skills, says Andriy Ropitsky, head of business development.
An initial agreement toward a €300 million loan by the European Investment Bank to winterize 1,000 Soviet-era public buildings across Ukraine was signed by representatives of the bank and of Community and Territorial Development Ministry. Benefitting 2.5 million people, or 7% of Ukraine’s population, the low interest, long term loan will pay for modern heating systems, thermostats and insulation in kindergartens, hospitals and schools.
The Finance Ministry sold $110 million worth of government hryvnia bonds, three times the amount at the auction one week earlier. Yields fell for all four bonds, but yields for 3-month and 6-month bonds fell to “pre-quarantine levels,” the Ministry reports on Facebook. According to the posted results, final yields were: 3-month – 9.84%; 6-month – 10.11%; 9-month – 10.89%; and 1-year – 10.86%.
Russian gas transit through Ukraine dropped by 46% January-May y-o-y, to 20 billion cubic meters, says Ukraine’s state-run gas transit operator. At this rate, Russia may send 52-55 bcm across Ukraine this year, about 40% less than last year and 15-20% less than the contracted volume. Under the contract signed Dec. 30, Russia commits to paying for shipping 65 bcm this year, whether it ships it or not. Russia is up to date on payments, reports Ukraine’s Transmission System Operator.
“If they walk away, it will open a Pandora’s box,” Yuriy Vitrenko, the Naftogaz executive who negotiated the new transmission contract, tells the UBN. “They may not like it, but they can only walk away if they have a legal justification.” Under the five-year contract, Gazprom commits to shipping 40 bcm a year from 2021 to 2024.
Taking advantage of historically low gas prices, Naftogaz has increased its stored gas reserves by 13% since mid-March, to 18 bcm. These low prices will be passed on to industrial users this month with a 19-21% cut in prices, Naftogaz promises. Last month, the state energy company cut gas prices to consumers by 21%, to $85 per 1,000 cubic meters.
Poland could increase gas supplies to Ukraine 5-fold this year, PGNiG CEO Jerzy Kwieciński, CEO of PGNiG, Poland’s state energy company, tells Polish Radio 24. During the first quarter, PGNiG sold 690 million cubic meters of gas to Ukraine. If rates are maintained, Poland could ship 2.7 bcm to Ukraine – five times the 554 million cubic meters of last year. With storage reservoirs filling fast, it is not clear if Ukraine wants to buy that much gas. At the beginning of last winter’s heating season, Ukraine had 21.8 bcm in storage, a record high for the decade.
The May rains came too late and did not fall far south enough to save the winter wheat harvest in Odesa, Kherson and Mykolaiv, Tetiana Adamenko, head of farm weather for the state Hydrometereological Center, tells UNIAN. Coupled with a shift to planting to corn, this may depress this year’s wheat harvest by 18%, to 23.2 million tons. For the upcoming marketing year, wheat exports could be down by one quarter, to 14.9 million, traders tell Reuters.
Here did Ukraine’s economy really fare in April, ground zero of the coronavirus shutdown? ICU investment bank’s researchers gleaned these insights from new data from the National Bank of Ukraine. All figures are for April, year over year:
Exports down: ferrous metals – 18%; aviation 61%; inbound tourism 96%
Exports up: food – 6.6%; mineral products (mainly iron ore) – 12.1%; IT services – 19.9%
Imports down: machinery (largely cars) 29%; and outbound tourism 72%
Wage remittances from workers abroad – Ukraine’s second largest export – decreased in April by 16.5% to $794 million. But for January through April, they increased by 1.6% to $3.7 billion. Last year’s official level was $12 billion.
ICU looks at April’s surprise $1.4 billion current account surplus and concludes: “Favorable terms of trade, relative resilience of exports and remittances, a sharp decline in imports and dividend payments provided a sharp improvement in the current account.”
Car imports dropped by 46% during the first quarter y-o-y, to 115,800, with a total value of $823 million, according Ukravtoprom, the car industry association. Measured by value, new car imports almost equaled used car imports. From January to March, 21,800 new cars were imported for $404 million. During the same time, 94,000 used cars were imported for $419 million. The largest sources of new cars were: Japan – 4,574; Romania – 3,849; and China – 3,335. The largest sources of used cars were: Germany – 26,425; US – 15,723; and France – 10,177 units. Last year, Ukraine imported 544,000 cars worth $3.6 billion.
McDonald’s is opening five new restaurants in Ukraine this year, the same pace of expansion as last year, Yulia Badritdinova, Ukraine CEO, said in an online press conference. She said the company has 93 restaurants in 20 cities, accounting for 14% of all restaurant visits in Ukraine. According to Olga Vasilyeva, marketing director, delivery service increased by 65% during the quarantine.
10 hryvnia coins go into circulation. Made of a galvanized nickel-plated zinc alloy, this silver-colored coin will gradually replace the red 10 hryvnia notes, reports the National Bank of Ukraine. In a program to phase out small notes, there are now 1,2,5 and 10 hryvnia coins. Ten hryvnia is worth 37 American cents.
Developing domestic air travel, Windrose Airlines launches daily flights June 15 from Kyiv Boryspil to Dnipro, Kharkiv, Lviv and Odesa. Kyiv-Mykolaiv starts July 15. In July, several routes will be three times a day. Priced to compete with Intercity train tickets, minimum one way air fares will be $30-35.
The camera never sleeps. Within the first minute of turning on Kyiv’s new speed camera system, just after last midnight Monday morning, the first speeder was snapped in the act. Seventeen hours later, the cameras had recorded 35,762 violations. Internal Affairs Minister Arsen Avakov reports the speed champions were: the driver of a Mercedes clocked moving around the city at 208 kph (120 mph), and the driver of a BMW who sailed through three cameras at 200 kph (124 mph). Drivers get fines by email and mail, with QR codes linked to mini videos showing their cars breaking the speed limit. On the second day, the number of violators dropped by 40%, reports Deputy Interior Affairs Minister Anton Gerashchenko.
- Rain Helps the Farmers
- Grain Exports Up 16%, Pushing Current Account Into Surplus, Catching China’s Eye
- Trains Roll Out of Kyiv Across the Nation
- Airlines Announce Flights from Kyiv to 13 EU Cities Starting June 16
The soaking rains of May are prompting the Ukrainian Grain Association to boost its grain, legume and oil seeds harvest forecast by 4%, to 98 million tons, near last year’s record level. With the bigger harvest, exports will increase to 58.5 million tons. Last year’s exports were 23% higher than the 2018/2019 marketing year. “Improved soil moisture almost all over the country” is easing drought fears and boosting yields, says Mykola Gorbachev, president of the association of producers, processors and exporters.
With farmers putting more land into corn, this year’s corn crop should be 6% above last year’s record of 35.2 million, the Association predicts. Prices of corn and wheat, Ukraine’s two largest export crops, have held up during the global coronavirus epidemic, reports Alfa-Bank Ukraine. Since the start of the year, corn prices are up 2% and wheat prices are up 3%. Ukraine is the world’s fourth largest exporter of wheat.
Grain exports are up 16% y-o-y, the Agriculture Ministry reports. With one month to go in the July/June marketing year, Ukraine has exported a record 54.3 million tons. As China cuts imports of US grain, Ukraine is becoming an increasingly important player in the world grain trade. During the first 11 months of the marketing year, Ukraine exported: corn – 28.6 million tons; wheat – 20.2 million tons; barley – 4.8 million tons; and wheat flour and other grains – 314,500 tons.
Due to higher yields, Ukraine is to boost its soybean harvest by 14% this year, predicts the Ukrainian Grain Association. With yields up by 6%, to 2.5 tons per hectare, the harvest of soy, a legume, is expected to hit 4.2 million tons, about 8th place worldwide. Yesterday, China’s government ordered large state-run agricultural companies to “pause” soybean purchases from the US, Bloomberg reports.
Farmer groups are protesting an Economy Ministry move to reserve 70% of the nation’s nitrogen fertilizer market for national producers. They say that imported fertilizers are generally 30% cheaper. They charge quotas would benefit two oligarchs: Dmitro Firtash, owner of the Ostchem group, and Ihor Kolomoisky, owner of DniproAzot. After 1,000 farmers picketed the Cabinet of Ministers Thursday, the government appears to be backing away from the quota plan.
Since 2014, hundreds of millions of dollars have been invested in Ukraine’s port logistics, tripling the capacity of modern elevators to 90 million tons, says Rainer Staltner, representative in Austria of the Chamber of Commerce and Industry of Ukraine. Given current export volumes, near 60 million tons, there is no urgent need for more investment in elevators, he told a webinar on food exports, reports Ukrinform.
Strong food exports and plummeting oil and gas import prices pushed Ukraine into a current account surplus in April, reports the National Bank of Ukraine. The surplus of $1.4 billion was a switch from a deficit of $292 million in March. For the first four months of this year, the current account surplus was $1.8 billion, compared to a deficit of $242 million during the same period last year. Alfa-Bank Ukraine reports that since the start of this year, gas prices are down 71%, and oil prices are down 43%.
For goods, the foreign trade deficit dropped in half during the first four months y-o-y, from $3.3 billion last year, to $1.5 billion this year. For services, the surplus more than doubled – from $626 million last year, to $1.4 billion this year.
Ukraine’s annual hot weather summer ban on trucks started last week. For fear of damaging soft asphalt, trucks are banned from 10 am to 10 pm when air temperatures rise above 28C (82F). Around the country, 982 sites are set aside for truckers to park. To combat the problem of overloaded grain trucks, the government is installing ‘weight-in-motion’ sensor devices with cameras to catch violators.
Pivdenniy, Ukraine’s busiest port, handled a record 2.1 million tons of cargo in May, the highest level since the port opened in 1978 as a satellite of Odesa. Formerly called Yuzhne, the port also unloaded 959 gondola cars a day, a new record for handling the roofless rail cars used for transporting coal or ore.
Ukrzaliznytsia re-launched inter-city train service yesterday, ending a 10-week suspension to combat the coronavirus pandemic. To prevent contagion, passengers wore masks and only half of seats were sold.
Interregional buses and 439 electric commuter trains resumed service last week in 10 of Ukraine’s 24 regions, largely in the east and south. They are Cherkasy, Donetsk, Ivano-Frankivsk, Kharkiv, Luhansk, Odesa, Poltava, Ternopil, Zhytomyr, and part of Khmelnitskiy.
The Cabinet of Ministers is preparing to lift the ban on foreign citizens entering Ukraine, Infrastructure Minister Vladyslav Krikliy writes on his blog. “The world is gradually recovering from the pandemic and the planes are returning to the sky again,” he wrote. Infrastructure Ministry and Ukraine’s airlines, he said, “are considering the possibility of restoring flights with Finland, Sweden, Denmark, the USA, Canada, Lithuania, Latvia, India, China, Azerbaijan, the Netherlands, Belgium, France, Moldova, Poland, Austria, Italy, Portugal, Albania, Slovakia, Kazakhstan, Armenia, Hungary, Egypt, Tunisia and the UAE.”
Belavia, LOT, WizzAir and Motor Sich plan to start re-flights from Kyiv Sikorsky airport June 16, reports the airport, located in Kyiv’s right bank Zhuliany neighborhood. The four airlines accounted for over 95% of the airport’s traffic, until it was closed in mid-March. From Kyiv, the destinations will be: Belavia – Minsk; LOT – Warsaw; Motor Sich – Zaporizhia; and WizzAir – Athens, Billund, Berlin, Bremen, Gdansk, Hannover, Larnaca, Lisbon, Nuremberg, Riga, Vilnius, and Vienna.
Turkey will open its borders to foreign tourists, including Ukrainians, on July 1, reports Ukraine’s Foreign Ministry. Cross-Black Sea flights will resume and Ukrainians can enter Turkey under the existing visa free, passport free system.
- $7 Billion in Aid on Ukraine’s Horizon
- Interest Rates May Be Cut Again Next Week
- Privatizers Win Control of Centrenergo
- SkyUp and Wizz Air Sell Tickets to EU For Mid-June Flights
Ukraine expects the IMF Board to approve a $5 billion loan Friday and to disburse a first $1.9 billion tranche on Saturday, Prime Minister Shmygal tells Reuters. The second $1.6 billion tranche is expected from September onwards, and the third $1.5 billion tranche would come next year, Shmygal said.
The European Union approved disbursement of €500 million in macro-financial assistance to Ukraine. The EU says it has now provided Ukraine with €3.8 billion euros worth of loans to the country since 2014.
“Ukraine remains high on the European agenda,” said Valdis Dombrovskis, a Latvian politician who is the EU’s Commissioner for Financial Stability “We continue political, financial and technical support, especially during this time of crisis, to support Ukraine’s reform agenda for building a more resilient economy.” He noted that as part of the EU’s policy to help its 10 eastern neighbors during the Covid-19 economic crisis, the EU is providing another €1.2 billion in MFA aid.
Confident of receiving the IMF money, the Cabinet of Minister has given the Finance Ministry the green light to pursue a $350 million World Bank loan.
Concorde Capital’s Alexander Paraschiy sees the multilateral aid as the first step toward Ukraine returning to the Eurobond market this summer: “That will also pave the way for Ukraine to attract additional financing for the state budget on international debt markets.”
Ukraine repaid a $1 billion Eurobond Thursday. Issued with US guarantees, the 5-year bond had an annual interest rate of 1.847%, the Finance Ministry reports. Prime Minister Shmygal tells Reuters the repayment “shows that we can and are able to service external and internal debt absolutely calmly.” He said Ukraine repaid the bond without dipping into its $26.2 billion in central bank reserves. While Ukraine continues to borrow on the domestic market, he said: “Today, in the current situation, there is no urgent need to go to foreign markets and borrow there, firstly because the situation is unfavorable.”
With a strong currency and low inflation, Ukraine’s central bank is expected to cut interest rates again, Bloomberg predicts. Despite seven successive cuts, Ukraine’s 8% prime is four times the 2% annual inflation rate. The next bank board meeting is June 11. In contrast to the financial crises of 2008 and 2014, Ukraine’s hryvnia kept relatively strong through the Covid-19 crisis. Today’s exchange rate is at the same level of one year ago, and 9% below the Feb. 28 peak.
Braving bomb threats, razor wire, brick walls, and strange court rulings, State Property Fund officials, backed by busloads of special police forces, entered the improvised headquarters of Centrenergo and installed the new, government-appointed leadership. Producing about 15% of Ukraine’s electricity and thermal power, Centrenergo may have cost the treasury $3.7 billion since 2004, partly by selling electricity at below market prices to Ihor Kolomoisky’s energy intensive ferro alloy plants, reports the Kyiv Post. The state company did not come out with 2019 financial results and executives hid the books, says Dmitry Sennychenko, head of the State Property Fund.
Centrenergo is to be privatized in Q2 of next year, Sennychenko tells Reuters. “We have created a commission, now we will choose a privatization adviser,” Sennychenko said after the raid on the improvised company headquarters, a sanatorium in Kyiv’s southern Koncha-Zaspa neighborhood. “This will be a consortium or investment bank, which will subsequently carry out all the necessary procedures for preparing the enterprise for privatization.”
SkyUp is selling tickets for flights starting June 23 to these countries: Albania, Armenia, Bulgaria, Czech Republic, France, Israel, Italy, Portugal and Spain. Starting June 30, the low cost airline offers flights to Cyprus, Georgia and Greece. The airline sells tickets to those countries, based on the countries’ plans to admit foreigners. Starting June 15, Greece says it will accept foreigners from 29 countries.
Ukraine’s Foreign Ministry is negotiating reciprocal travel rights with Greece, Georgia and Turkey. Prime Minister Shmygal said on “Freedom of Speech of Savik Schuster: “We will not restore regular flights before June 15. After June 15, those countries that will receive, obviously, will gradually restore regular flights.”
With airlines in crisis, SkyUp asks the Rada to pass a law excluding domestic air travel from VAT, a privilege enjoyed by international air travel. Six months ago, the parliament’s Committee on Transport and Infrastructure recommended passage. With its international route network sharply reduced, SkyUp says it can no long afford to offer low prices on domestic feeder flights.
Wizz Air, historically the discount airline with the most flights to Ukraine, is buying new jets, adding new destinations and opening four new hubs this summer, including in Lviv, Reuters reports from London. Wizz Air starts flights from Ukraine June 16. Strong in Central Europe, the Budapest-based airline launches a Kyiv Sikorsky – Salzburg, Austria route July 1.
Boryspil airport has taken out a $10 million loan from Alfa Bank. In 2018 and 2019, Boryspil was among the top 10 fastest growing airports in Europe. After the government suspended scheduled air travel to Ukraine in mid-March, the airport’s revenue fell by 90%.
The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.
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