Ukraine’s headline current account (C/A) deficit stood at $2.2bn in June, widening from $1.7bn in May, while the financial and capital account (F/A) balance, including IMF funds, recovered to a $1.0bn surplus from a $1.7bn deficit in May.

Ferrexpo reported 1H24 net sales of $549m, up 72% h-o-h and 64% y-o-y, EBITDA of $79m, up 19% h-o-h and 23% y-o-y, and net income of $55m, up from a net loss of $112m in 2H23 and net income of $27m in 1H23. The EBITDA margin came in at 14%, up 6.4pp h-o-h and down 4.8pp y-o-y).

The past three months, since our previous update in April, extended the pattern of grinding Russian assaults that have dominated the current Russian offensive phase ongoing since last October.

Finance Minister Serhiy Marchenko said in an interview with a local media outlet that it would be desirable for Ukraine to “exit” GDP warrants, as the instrument represents a de-facto ”time bomb”. He also said that the Ministry is preparing its next steps with respect to the warrants based on the information it receives from the market.

The Ministry of Finance placed UAH 5.3bn ($130m) of hryvnia-denominated bonds and $95m of USD-denominated paper at a primary auction yesterday.

Ukraine’s direct and guaranteed public inched up by 0.8% or $1.2bn m-o-m in June, to $152bn, rising by 4.7% YTD.

The Ukraine CEMBI Broad Index returned 1.6% in 2Q24 as improved market sentiment in May-June helped compensate for profit-taking in April, bringing its 1H24 performance to +13.9%.

The European Commission, the EU executive body, announced on Friday the payment of EUR 1.5bn ($1.6bn) in proceeds from frozen Russian assets held in the EU towards EU facilities financing Ukraine’s military and reconstruction needs. As per an earlier EU regulation, 90% of the proceeds will be channeled to the European Peace Facility and “finance the acquisition of priority military equipment, namely air defense, ammunition for artillery — and also through procurement for the Ukrainian defense industry,” EU top diplomat Josep Borrell said. The remaining 10% will go through the Ukraine Facility, the EU’s economic aid package, to support reconstruction needs. The next transfer of profits earned on immobilized Russian assets is expected to be made in March 2025.

Ukraine harvested 22.3 Mt of grain and oilseeds as of Jul. 26, up 62% y-o-y. The harvested area was reported at 5.9 Mha, mainly including winter wheat, barley and rapeseed, up 63% y-o-y and representing 31% of the total area under grain and oilseeds crops. Wheat was harvested from 76% of total plantings, with current production at 14.7 Mt and yields averaging 4.20 t/ha (-5.3% y‑o-y). The barley harvest, 79% complete, stood at 3.9 Mt, yielding 3.79 t/ha (-3.8% y-o-y). Also, farmers harvested 3.1 Mt of rapeseed from 88% of the area under the crop, for a yield of 2.83 t/ha, up 5.6% y-o-y.

Most Russian ground attacks continue to take place in Donetsk region, with other sectors remaining much quieter

The NBU Board left its key rate unchanged at 13.0% p.a., in line with its forward guidance, explaining the decision by the need to maintain the attractiveness of UAH-denominated assets and ensure F/X market stability amid accelerating inflation (4.8% y-o-y in June vs. 3.3% in May). The Bank’s forward guidance remained unchanged, projecting the key rate to remain flat at 13% for the rest of 2024 in the base-case scenario, drop to 11% by end-2025 and further to 10% by end-2026. The NBU stressed that it would swiftly adapt its monetary policy should the balance of risks for inflation and exchange rate change.

WSE-listed Astarta Holding, Ukraine’s largest sugar producer, reported 2Q24 sugar sales of 142 kt (+104% q-o-q and +106% y-o-y), priced at $617/t on average (-4.9% q-o-q and -20% y-o-y). Grain and oilseed sales fell by 63% q-o-q to 125 kt (+34% y-o-y). Soybean oil sales were flat q-o-q at 14 kt (+11% y-o-y), while soybean meal sales increased by 4.7% q-o-q to 45 kt (-24% y-o-y). The average selling price of soybean oil dropped by 0.9% q-o-q and 14% y-o-y to $779/t and that of meal fell by 6.5% q-o-q and 17% y-o-y to $452/t.

The State Statistic Service (SSS) reported retail turnover growth of 16.3% y-o-y in 1Q24, almost on a par with 17.0% in 2023 (revised upwards from provisional 15.4%).

Fitch Ratings downgraded Ukraine’s long-term foreign currency issuer rating to C from CC after the Ukrainian government and a group of sovereign Eurobond holders reached agreement in principle on the terms of commercial debt restructuring and parliament passed a bill authorizing the government to suspend payments on commercial external debt for three months. Fitch’s underlying assumption remained that the war with Russia would continue for the rest of 2024 and possibly into 2025 at the current level of intensity. Having become protracted, the war will weigh on public finances, with the budget deficit expected to narrow only marginally this year, to 17.1% of GDP from 19.5% in 2023, pushing public debt to 92.5% of GDP (net of restructuring effect), up from 84.4% in 2023 and well above a median of 70% for B/C/D-rated sovereigns.

Ukrainian Foreign Minister Dmytro Kuleba, on a visit to China to “search for ways to stop Russian aggression,” met his Chinese counterpart Wang Yi on Wednesday.

DTEK Managing Director Dmytro Sakharuk said the company plans to restore by October 60-70% of the power generating capacity it had before a recent wave of Russian attacks in March-June, provided that there is no new damage from further Russian strikes. The company plans to allocate an additional UAH 4bn ($100m) for repairs, on top of the UAH 1.3bn ($32m) already spent. Total reconstruction costs are estimated at $350-400m. DTEK is financing current repairs with own capital. Additionally, it will receive some equipment from decommissioned power plants in Europe, satisfying 10-15% of its needs.