President Zelensky replaces chief military commander as part of wider reshuffle

Ukraine exported 6.0 Mt of grain and oilseeds in January, the seventh month of the marketing year (MY) 2023/24 (July 2023 – June 2024), flat m-o-m and up 25% y‑o‑y. Grain exports totaled 5.3 Mt (+1% m-o-m, +28% y-o-y) while oilseed exports stood at 757 kt (-2% m-o-m, +5% y-o-y). January sunflower oil exports were reported at 611 kt (-9% m-o-m, +76% y-o-y).

State rail monopoly Ukrainian Railways (RAILUA) reported freight transportation of 14.1 Mt in January, up 3.0% m-o-m and 25% y-o-y.

President Volodymyr Zelensky dismissed Commander-in-Chief of Ukrainian Armed Forces Gen. Valeriy Zaluzhny, replacing him with Gen. Oleksandr Syrsky.

According to a Jan. 19-25 nationwide poll by Razumkov Center, an NGO, the Ukrainian army remained the most trusted public institution in the country with a net score of 91% (calculated as the percentage of those trusting less the share of those distrusting), followed by volunteer military formations (76%) and the State Emergencies Service, which deals with the aftermath of Russian attacks against civilians (70%). Among political figures, President Volodymyr Zelensky had a net trust score of 45%, followed by the governor of the war-zone Mykolayiv region Vitaliy Kim (37%) and Foreign Minister Dmytro Kuleba (22%).

The Cabinet of Ministers set the minimum payout ratio for dividends to be transferred to the state budget by state-owned enterprises (SOE) at 80% of the previous year’s net income (with several exceptions), up from 50% a year ago. In particular, the minimum payout for Naftogaz was set at 95% (up from 30% last year) and that for Naftogaz’s 50%-owned subsidiary Ukrnafta at 30% (down from 50% but on condition that 50% of 2023 net income is reinvested). Additionally, Ukrainian Railways was mandated to pay out at least 50% of 2023 NI (flat y-o-y) provided that another 30% is reinvested. For state-owned banks, the government left minimum payouts unchanged for Oschadbank and Privatbank at 30% and 80% respectively and increased it for Ukreximbank to 80% from 50%.

NBU gross foreign reserves fell by 4.9% or $2.0bn m-o-m in January, to $38.5bn (+29% y-o-y). The end-January tally was equivalent to 5.1 months of prospective goods and services imports, according to a central bank estimate. Meanwhile, the hryvnia’s official exchange rate to the US dollar was virtually unchanged in January, ending the month at UAH 37.87:USD, before strengthening by 0.9% in first four working days of February, to UAH 37.55:USD.

The Ministry of Finance placed UAH 5.1bn ($135m) of hryvnia-denominated bonds and $79m of USD paper at a primary auction yesterday.

State-owned power transmission system operator Ukrenergo reported that a group of holders of its Eurobonds hired legal firm Cleary Gottlieb Steen & Hamilton LLP to discuss a restructuring or liability management transaction with Ukrenergo’s $825m bond issued under a direct government guarantee. The bondholder group voiced its support for restructuring on a standalone basis and not as part of Ukraine’s prospective sovereign restructuring.

According to provisional Finance Ministry data, the central budget’s cash deficit totaled UAH 15bn ($0.4bn) in January, shrinking from UAH 72bn ($2.0bn) a year earlier.

Minutes from the latest NBU Monetary Policy Committee (MPC) meeting, which preceded the central bank’s rate meeting on Jan. 25, showed that all 11 committee members supported leaving the key rate unchanged at 15% p.a., in line with the NBU’s earlier forward guidance. The MPC explained its opinion by expectations of a temporary acceleration in headline inflation to 8.6% y-o-y in 2024 from 5.1% in 2023 and delays to foreign economic support. The majority of MPC members said they saw room for a limited rate cut of 100bp by end-2024 in the base-case scenario, with the latter assuming sufficient foreign aid inflows of $37bn for the full year. Some members did not rule a sharper 200bp cut. However, the MPC agreed that the NBU should be ready to adapt its monetary policy to changing circumstances, with some members suggesting mid-2024 as a good timing for reviewing the balance of risks and key rate guidance.

DTEK Oil & Gas (DOG) on Dec. 31 made a $50m amortization payment on its 2026 bond, the first of scheduled partial redemptions, along with a $14.3m coupon. The payment confirmed our long-held view that the company has access to F/X despite earning no export revenues.

The National Bank’s index of business expectations, a PMI-type gauge, dropped by 4.8 points m-o-m in January on top of a 3.4pt decline in December, sinking to 41.0 on a 0-100 scale. However, the index remained 3.5pt higher y-o-y.

According to Infrastructure Minister Oleksandr Kubrakov, Ukraine has exported around 20 Mt of commodities via three of its Black Sea ports since opening them in August, including 6.3 Mt shipped in January 2024 (-14% m-o-m). Exports of agricultural commodities totaled 14.3 Mt over the period.

Speculation about top military commanders’ dismissal heats up; President Zelensky talks of broader “reset of leadership, not just military”

Ukraine’s headline current account (C/A) ran a $0.8bn deficit in December, narrowing from a $1.5bn gap in November and bringing the 2023 deficit to $9.8bn, down sharply from a $8.0bn surplus in 2022. The financial and capital account (F/A) surplus, including IMF funds, stood at $2.4bn in December, improving from $1.2bn in November and bringing the full-year surplus to $21bn, up sharply from a $10bn deficit in 2022.