Fitch Ratings says in a new report that Russia's provision of external financing and cheaper gas supplies to Ukraine significantly reduces the risk of a sovereign external liquidity crisis in 2014.
Ukraine received the first USD3bn tranche of a promised USD15bn in Russian financing on 24 December 2013 and plans to place a further USD12bn in Eurobonds by end-2014. The schedule and amount of borrowing is still being discussed. If realised, this would be more than sufficient to refinance USD6.7bn in sovereign external debt repayments in 2014, although the government will still need to borrow elsewhere to finance a widening fiscal deficit of up to 7% of GDP.
Fitch now expects the exchange rate to hold at USD/UAH8.3 through 1H15. Although the authorities could in theory take advantage of relief from external pressure to float the hryvnia, Fitch considers this unlikely ahead of the April 2015 presidential elections