Concorde Capital Research: Rada adopts first draft of pension reform, getting closer to IMF tranche

July 14, 2017 - Cbonds

 

Ukraine's parliament (Verkhovna Rada) voted on July 13 to approve the first reading of pension reform legislation, with 282 votes in support (with a 226-vote majority needed). The reform is aimed at trimming new pensioners from government rolls by raising official work experience to 25 years from 15 years gradually during the next ten years, with some flexibility for earlier retirees. It also limits the professions eligible for early retirement. To ease the pain, the reform imposes a standard calculation for all pensions that will be based on the current average national salary. That will result in some increase in pensions for most pensioners as of October 2017. The bill can be adopted in full at the next parliamentary session, which starts in September. Adopting pension reform is a key precondition for the IMF to provide Ukraine with its next loan tranche.

Regarding lauching a farmland market, another key IMF requirement from its April memorandum, the Ukrainian News agency confirmed on July 13 that the IMF won’t demand it for its next loan tranche, citing an anonymous source close to the negotiations. That reaffirms our conclusion that the farmland issue won’t be an impediment for receiving the next tranche, anticipated this autumn.

Alexander Paraschiy: Pension reform calls for a new level of pensions as of October, which means it should be adopted in early September to be fully functional. These developments on pensions and farmland will serve to reduce Ukraine’s sovereign risk, as the likelihood of getting a positive review and loan tranche from the IMF’s EFF program this fall (possibly in October) has improved significantly. This will also open a window for the possible placement of sovereign international bonds, as well as enable Ukraine to count on other multilateral borrowing.
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Cbonds page: Ukraine
Issuer profile:

Ukraine is a country in Eastern Europe. It has an area of 603,628 sq km, making it the largest country entirely within Europe. The country is home to 45.4 million people.

Outstanding issues:
30 issuesUSD26,047,041,000
1 issuesEUR141,320,000
276 issuesUAH605,951,920,000
Issuer rating:
RIA RatingD/Sovereign ratings10/09/2015
Dagong CreditCC/NegativeInternational scale rating (foreign curr.)07/17/2015
Dagong CreditCC/NegativeInternational scale rating (local curr.)07/17/2015
Organisation for Economic Co-operation and Development (OECD)7/Country Risk Classifications06/24/2016
Moody's Investors ServiceCaa2/PositiveLT- foreign currency08/25/2017
Moody's Investors ServiceCaa2/PositiveLT- local currency08/25/2017
S&P Global RatingsB-/StableForeign Currency LT10/19/2015
S&P Global RatingsB-/StableLocal Currency LT10/19/2015
S&P Global RatingsuaBBB-/LT National Scale (Ukraine)10/19/2015
Fitch RatingsB-/StableLT Int. Scale (foreign curr.)04/28/2017
Fitch RatingsB-/StableLT Int. Scale (local curr.)04/28/2017
Fitch RatingsWithdrawn/National Scale (Ukraine)09/02/2011
Rating Agency RAEX (Expert RA)Withdrawn/Foreign curr. scale07/04/2016
Rating Agency RAEX (Expert RA)Withdrawn/Local curr. scale07/04/2016
National Rating AgencyiSD/NegativeGlobal scale09/30/2016
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