Saturday, 5 November 2011

Ukraine Seeks To Enlarge VTB Bank Loan To $6 Billion, ICU Says

KIEV, Ukraine -- Ukraine will seek to expand its $2 billion loan from VTB Group, Russia’s second-largest bank, to support its current account, Investment Capital Ukraine said.
An agreement may include “increasing the loan from $2 billion to $6 billion with an extended maturity,” Kiev-based Investment Capital Ukraine, or ICU, said in its quarterly report e-mailed late yesterday.

Ukraine’s current-account deficit widened in the third quarter from the same period a year ago to $2.6 billion, the biggest gap since the final three months of 2008.

The shortfall will probably widen to 4.5 percent of gross domestic product this year, said Ihor Shumylo, the head of the central bank’s economic department, on Oct. 28.

Broadening the VTB loan will probably be a part of larger agreement with Russia that includes natural gas supplies and trade, the ICU said.

Authorities are in talks with Russia to reduce the price paid for natural gas deliveries and cut annual volumes.

Ukraine might win a discount of between $50 to $100 per 1,000 cubic meters to the price of imported gas supplied by Russian monopoly OAO Gazprom, according to the report.

The nation received the six-month VTB loan in 2010 and had it extended in December 2010 and in June.

The loan has an interest rate of 6.7 percent.

Hryvnia Weakness

The ICU sees “quite a marginal” weakness of the hryvnia at the end of this year and the beginning of 2012 as gas prices will peak in the last three months of this year and in the first quarter of 2012.

The hryvnia’s rate may move from a range of 8.2-8.4 to the dollar to 8.0-8.1 per dollar in late 2012 and in the following two years, the bank said.

A decline in demand and prices for Ukraine’s steel, which adds pressure on current account balance, is believed temporary by ICU “with a likely recovery coming” in first two quarters of next year.

Ukraine’s steel exports will probably fall 5 percent to 5.2 million metric tons in the fourth quarter of this year in comparison to the third quarter, the ICU said.

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