Ukraine will probably resume borrowing in Q2

„There is nothing that can force us to start borrowing in the first three months of next year,” Azarov said at a press conference in Kiev today. „We will probably sell bonds in the Q2.” The government plans a budget deficit in 2007 of 15.1 billion-hryvnia ($3 billion), or 2.55% of GDP, up from 13.2 billion-hryvnia this year. Fitch Ratings raised its outlook on the second-biggest former Soviet Union economy to positive in October on optimism the government, formed in August, will usher in greater political stability. Fitch rates Ukraine BB-, three levels below investment grade. The country's outlook was also raised to positive by Moody's Investor's Service November 10. „International credit rating agencies raised Ukraine's outlook this autumn, and they will raise it more because of the remarkable results of 2006,” said Azarov.

The Finance Ministry said September 14 that the annual inflation rate will fall to 7.5% next year, while the economy will grow 6.5%. Ukraine's $89 billion economy will probably expand 7% this year. Ukraine sold 5 million hryvnia of three-year bonds with an average yield of 9.4% and 5 million hryvnia in two-year bonds with an average yield of 9% on September 4. The government wants the country's national bank to diversify its foreign currency reserves, Azarov said. The bank keeps reserves mainly in US dollars. „The bank must have a look on what foreign debt we have and what countries are our trade partners,” Azarov said. „We have huge trade with Russia, so why not to have reserves in rubles, which is now a more stable currency than the dollar.” Ukraine's reserves rose to $21.2 billion as of November 30, a 15-year high, according to the central bank data. (Bloomberg)