The IMF and Ukrainian authorities reached a staff-level agreement (SLA) on the fifth review under the Fund’s $15.6bn 4-year EFF program, part of a $122bn support package for Ukraine. The IMF mission’s chief, Gavin Grey, said the IMF Executive Board’s approval of the review was “expected in the coming weeks.” Subject to approval by the IMF Board, Ukraine will receive the sixth loan tranche of $1.1bn.

The Ministry of Finance placed UAH 10.9bn ($265m) of hryvnia-denominated bonds and $220m of F/X-denominated debt at a primary auction yesterday.

According to provisional data from the Finance Ministry, the central budget ran a cash surplus of UAH 83bn in August ($2.0bn) after receiving UAH 228bn ($5.5bn) of grant financing.

The NBU approved a new package of F/X liberalization measures intended to facilitate Eurobond servicing and other selected cross-border transactions. Among the key changes, the central bank permitted local companies to repatriate dividends to compensate for coupon payments on their outstanding Eurobonds that had been made using their offshore F/X liquidity between the start of the Russian invasion (Feb. 24, 2022) and Jul. 9, 2024. The following eligibility criteria will apply: dividends are paid using the company’s own onshore F/X liquidity the company has been compliant with the requirement to return export proceeds to Ukraine during 12 months preceding the dividend repatriation. Additionally, in order to limit unproductive capital outflows, the NBU introduced a UAH 500,000 (c. $12,000) monthly cap on selected transactions by individuals abroad conducted with the use of their Ukrainian bank cards, including purchases of luxury good and payments for real estate services.

Fitch Ratings downgraded its long-term foreign and local currency issuer default ratings on DTEK Renewables to RD from C and simultaneously upgraded them to CC following the company’s Eurobond restructuring, which the agency treated as a distressed debt exchange.

NBU gross foreign reserves rose by 13.7% ($5.1bn) m-o-m in August, to $42.3bn (+4.5% YTD). The end-August tally was equivalent to 5.4 months of prospective goods and services imports, according to the central bank. Meanwhile, the official exchange rate of the hryvnia to the US dollar was largely stable in August, ending the month at UAH 41.2:USD, flat m-o-m and down 7.8% YTD.

Key highlights from last week: Russian advances towards Pokrovsk slow but continue in nearby Donetsk region sectors Russia again escalates strikes against civilians amid limited battlefield successes US administration seeking to extend c. $6bn of military aid for Ukraine before it expires by end-September

Metinvest reported 1H24 sales of $4.3bn, up 12% h-o-h and 22% y-o-y, including $2.5bn from the metallurgical segment (+2% h-o-h and y-o-y) and $1.8bn from the mining segment (+30% h-o-h and +63% y-o-y). EBITDA jumped by 74% h-o-h and 33% y-o-y to $650m, with metallurgical segment EBITDA at $175m (vs. -$7m in 2H23 and +5.4% y-o-y) and mining EBITDA at $527m (+28% h-o-h and +47% y-o-y).

LSE-listed MHP, Ukraine’s largest poultry producer, reported 2Q24 sales of $770m (+7% q-o-q but -5% y-o-y), EBITDA of $153m (+20% q-o-q and +40% y-o-y; incl. IFRS 16 effect) and net income of $29m (+81% q-o-q and +66% y-o-y).

Fitch has assigned CCC ratings to Ukraine’s newly issued sovereign Eurobonds of A and B series, in line with the sovereign’s expected post-restructuring long-term foreign currency rating. At the same time, the agency affirmed Ukraine’s long-term foreign currency rating at RD in view of the restructuring process having not been finalized as the government announced a suspension of payments on additional commercial debt obligations including a $0.7bn Cargill loan, a $0.8bn Ukrenergo bond, and $3.2bn of GDP warrants. Fitch said it will maintain the RD rating until it can judge that the debt exchange has been completed and relations with a significant majority of Ukraine’s external commercial creditors have normalized.

The National Bank’s index of business activity expectations, a PMI-type gauge, rose by 4.0 points m-o-m in August, to 48.4 on a 0-100 scale (-0.9 y-o-y).

The Ukrainian Economy Ministry estimated July real GDP growth at 2.7% y-o-y, up from 1.6% in June (revised upwards by 0.5pp) and bringing the 7M24 tally to 4.0% y-o-y. The Ministry said the growth acceleration was fueled by an earlier start to the harvest of agricultural crops, while domestic economic activity also remained supported by the stable operation of Black Sea ports, availability of imported power for industrial enterprises, which helped mitigate the impact of domestic power shortages, and construction projects financed from the state budget. The Economy Ministry said the latest real GDP performance was consistent with its full-year growth forecast of 3.5% y-o-y.

Ukrainian parliament confirmed nine government ministers yesterday, completing a reshuffle initiated by President Volodymyr Zelensky this week. Among the key market-relevant appointments, career diplomat and former presidential administration official Andriy Sybiha became the new foreign minister, head of the state defense company Ukroboronprom Herman Smetanin moved to head the Strategic Industries Ministry, and Deputy PM for European Integration Olha Stefanishina had her mandate expanded to include the Justice Ministry. The reshuffle also spanned the ministries of agriculture, regional development, war veterans, environmental protection, sports, and culture.

German Chancellor Olaf Scholz said yesterday Germany would deliver 17 additional IRIS-T short- and medium-range air defense systems to Ukraine by 2026, including four by end-2024. These deliveries will come on top of seven IRIS-Ts shipped to Ukraine since 2022.

Ukrainian Railways (RAILUA) CEO Yevhen Liashchenko, speaking at a media event yesterday, said the company booked monthly losses of UAH 0.6-0.7bn in July and August due to increased transportation of loss-making cargoes, higher electricity costs and non-cash F/X losses, after earning net income of UAH 3bn in 1H24 ($78m; down from $130m in 1H23). Based on the current dynamic of cargo transportation and its composition, full-year net profitability may slip into negative territory. In turn, an alignment of freight tariffs requested by RAILUA, provided that it’s approved by the government, would add UAH 3bn to this year’s bottom line, resulting in a positive NI value.

Vodafone Ukraine (VFU), Ukraine’s second largest mobile operator, held a conference call to discuss its 1H24 financial results. Management confirmed that the company was working on multiple options to address its $400m Eurobond due in February 2025, including fully repaying the debt at maturity provided that prevailing F/X restrictions in Ukraine allow for that. VFU expects to have enough cash available by next February to repay the notes. Alternatively, if F/X restrictions prevent VFU from using its local liquidity to repay the bond principal, the company may consider refinancing or maturity extension options (no details were provided). The company also clarified that its end-1H24 cash and short-term investments totaling $294m (c. 75% in F/X) were held in Ukraine.