In a period of weakening global economies due to the coronavirus pandemic, most investors become depressed and sell off assets, and this behavior allows more balanced players to buy assets often even for nothing, said Freedom Finance Ukraine analyst Denis Bely.
Despite the coronavirus pandemic, economic halt, changes in the Cabinet of Ministers and devaluation of the hryvnia, there are no preconditions for default in Ukraine, an analyst with Freedom Finance Ukraine Denis Bely told Facts.
He noted that non-residents, fearing failure to fulfill obligations and devaluation of the hryvnia, began to withdraw from government internal and external bonds, but the panic was unfounded.
“Today’s horror stories are just a vivid manifestation of the desire of currency and stock speculators to rock the situation and play on the fear of investors. During the weakening world economies, because of the coronavirus pandemic, most of them become depressed and sell off assets. This behavior allows more balanced players to buy up assets often even for nothing. It follows from this that before you sell something, you need to assess what the real value of the asset will be after the panic in the financial markets ends, “recommends the ex ert.
The devaluation of the hryvnia from 23 to 28 UAH per US dollar is the restoration of monetary disparity, which is caused by the excessive demand of non-residents for domestic government bonds in the hryvnia, he noted, but Ukraine has already passed most of the devaluation impulse and is unlikely to go beyond UAH 30 for $ 1.
“Default is a lack of opportunity and a borrower’s refusal to fulfill his obligations. What could cause a default? Lack of liquidity to pay obligations,” Bely reminded. “In 2020, the government needs to spend about 400 billion UAH on servicing and paying off debts that exist. Of these, almost 100 billion UAH was paid in the first three months of the year, while May, July and September will traditionally peak in payments, by the way, such a load on March and September on external debt is caused by coupon payments most of the Eurobonds in these months. Net international reserves amounted to $ 17.7 billion at the end of February 2020. These funds are liquid and can be used to pay off debts. If you subtract the negative interventions in the interbank market in March 2020, amounting to $ 2.2 billion, then we get about $ 15.5 billion reserve. “
He added that at the current rate, such a volume of reserves corresponds to UAH 434 billion, which allows you to pay off all debts in 2020.
“And if you take into account another 10% of the budget deficit (pessimistic scenario), which is supposed to be 100 billion UAH, then the positive difference between the available liquid reserves and expenses will be 30 billion UAH. This difference, of course, is relative, and there is no point in spending reserves on payments of debts in 2020. It is logical to refinance the main debt burden on external debt – a tranche from the IMF or other international organizations.This will save the NBU reserves, the volume of which should not fall below the level of import coverage by Heat-three months That is, in 2020, there are no prerequisites to the declaration of default is not “-. I explained investment analyst “Freedom Finance Ukraine”.
He is convinced that now it makes sense to invest in bonds.
“I recall that Ukraine approached the crisis of 2014-2015 with almost no net reserves of the NBU – this led to a delay in payment of obligations on external debts, but domestic debt was serviced without delay (including foreign currency bonds). Do not despair, but rather use the opportunity to purchase bonds with a high rate of return in both currency and hryvnia, “recommends Bely.
IMF Managing Director Kristalina Georgieva believes that the epidemic could slow down the global economy by 0.1 percentage points, provided that the world begins to recover from the effects of the outbreak in the second quarter of 2020.
Prime Minister Denis Shmygal said that Ukraine could benefit from the onset of the global financial and economic crisis and that the country is entering into it more prepared than it was in 2008.