Fixed Income
Ukrainian sovereign Eurobonds were little-changed last week despite the pre-Christmas cheer in global financial markets. Internal developments were concentrated around the country’s budgetary parameters for 2015, and Parliament passed the budget bill late on Sunday night (Dec 28). The document includes a base case forecast of a 4.3% decline in GDP and projected consumer inflation of 13.1% YoY. These figures both appear to be clearly over-optimistic, raising questions about whether the Poroshenko regime is prepared to face the possibility of a deeper recession in the country next year. Meanwhile, the government managed to push through supplementary amendments to the tax code designed to increase tax revenues and promote import substitution. The national budget’s approval is a key step in the process of new discussions with the IMF regarding expansion of the standby program amount, not to mention the disbursement of a USD 2.7bn tranche scheduled for late January.
