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Russia: Deepening Crisis or Road to Recovery?
Posted on October 19th, 2009 Comments welcome Share/Save PrintIt is difficult to get a clear picture of the outlook for the Russian economy, as Russian government officials have been coming out with varied economic projections ranging from nascent recovery to prolonged stagnation. But there is certainly no coordinated message as to how the economy will develop.
On the one hand, Russian Finance Minister Alexei Kudrin has been notably optimistic. In early September, he stated that Russia would be on its way to recovery as early as the third quarter of 2009. Later in the month, he said that the new forecast allowed him to predict a 1.6% GDP increase in 2010, with 3% in 2011 and 4.5% in 2012. He went so far as to estimate that Russia’s GDP will reach its pre-crisis level in the third quarter of 2012, although he did admit that adverse developments in the world economy would have a negative impact.
More in the middle of the spectrum, President Dmitry Medvedev has shown signs of optimism but has been more cautious than Kudrin. In discussing the results of anti-crisis efforts over the past year, he spoke of a slight GDP increase in the third quarter of 2009, as “just the first sign of recovery,” admitting that “it is too early to speak of a steady growth.”
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IMF Releases Third Tranche of Ukrainian Loan
Posted on July 29th, 2009 Comments welcome Share/Save PrintOn July 29 the IMF announced the disbursement of the third tranche - worth $3.3 billion - of its standby loan to Ukraine. This brings the total funds released to $10 billion out of the $16.4 billion promised in November 2008.
The negotiations were more straightforward this time than they were in May, when the second tranche was approved after delays. The IMF seemed generally pleased with the progress Ukraine has made, although concerns remain about falling levels of output and industrial production.
In order to pass muster with the IMF, Ukraine has ostensibly agreed to reform Naftogas, the state gas company, and the gas supply system generally. This includes boosting the transparency of the traditionally opaque company, as well as implementing a schedule of gas price increases to help address Ukraine’s on-going gas payment issues with Russia. Ukrainian gas sector reform has, however, long been a hobbyhorse for international institutions, and it remains to be seen whether these IMF conditions will result in any substantive change.
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Finding a Way Through the Energy Crunch
Posted on July 6th, 2009 Comments welcome Share/Save Print
By Yulia Sobko, Head of Financial Communications and Investor Relations, The PBN Company, Kyiv
A Russo-Ukrainian gas dispute has, since 2005, been a recurring winter event that threatens serious repercussions for EU gas supplies. This year, however, the annual disagreement has been worse than ever, rearing its head each month and even dragging on into the summer. This situation has not only caused irrevocable damage to both Ukraine and Russia’s international image, but also has serious economic consequences that have been exacerbated by the recession.
Ukraine, which continues to be fully reliant on Russian gas, has been hard hit by the credit crunch and has severe budgetary problems. A revised supply deal signed in January gave Gazprom more favorable terms, and Ukraine is already in arrears on its gas payments.
In early June, Naftogaz, the Ukrainian gas supply company, said it will struggle to pay future bills and that it needs to raise a whopping $4.2 billion. Given that Russia supplies 25% of EU gas, and 80% of those supplies flow to Europe through Ukraine’s pipeline network, Ukraine was hoping for European funding to meet its obligations. It also put forward an alternative supply proposal in which the European gas companies supplied via Ukraine would pay Russia directly and then ‘store’ their gas in Ukraine, eliminating Naftogaz as the financial middleman. German utility RWE expressed interest in the idea and said it has put proposals on the table. However, Germany’s biggest gas company, E.ON Ruhrgas, has ruled out the idea. European industrial group Eurogas said it was still consulting its members and could not yet gauge their response.
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More GDP News: Ukraine’s Q1 Figures, and They Aren’t Pretty
Posted on July 2nd, 2009 Comments welcome Share/Save PrintFollowing on the Russian GDP forecast earlier this week, Ukraine has released its GDP statistics for the first quarter of 2009, revealing a 20% decline over the three months. Although a steep drop, it was not quite as bad as politicans had feared - President Viktor Yuschenko had predicted a 25-30% drop in April. It’s certainly not a time for rejoicing, however: it’s the worst Q1 contraction of any country in Central & Eastern Europe for the period.
Ukraine’s GDP figures were released during a visit from the IMF, which is deciding about releasing the third tranche of the $16 billion it has promised. So watch this space - with economic indicators like these (and questions over gas payments to Russia), Ukranie certainly needs that next $3 billion sooner rather than later.
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[Kazakhstan’s Banking Sector] #4 Kazkommertsbank
Posted on July 1st, 2009 Comments welcome Share/Save PrintThe second largest bank in Kazakhstan, Kazkommertsbank (KKB) has a 26% market share in corporate lending and 14% share in retail lending. It is one of the three London-listed Kazakh banks, having conducted an Initial Public Offering in 2006 that raised $1.7 billion.
At the beginning of 2009, KKB was - together with BTA Bank, Alliance Bank and Halyk Bank - bailed out under the government’s bank rescue program. It was allocated a total of $1 billion as part of the anti-crisis package which gave National Wellbeing Fund Samruk-Kazyna, the country’s sovereign wealth fund, the option to acquire a 25% stake.
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Down But Not Out - Ukraine’s Banking Sector is Putting Up a Fight
Posted on June 24th, 2009 Comments welcome Share/Save PrintBy Yulia Sobko, Head of Financial Communications and Investor Relations, The PBN Company, Kyiv
As June comes to close, the Ukrainian banking sector is able to take a bit of comfort from recent events. The government has finally set a bank bailout in motion by allocating 1% of GDP (UAH 9.6 billion) to recapitalize Rodovid Bank, Ukrgazbank and Bank Kyiv in exchange for majority stakes. Nadra and Ukrprombank are also waiting in the wings, pending resolution of issues with creditors.
Prominvestbank, the first victim of the banking crisis that was nationalized in late 2008, recently paid back its loan. Finance&Credit decided it doesn’t need state support as its financial situation has markedly improved. And even though banking sector experts don’t exclude the possibility of insolvencies in other systemically important banks, it is hoped that the bailout, together with the generally more optimistic market sentiment, might mean we are on a path of a gradual strengthening of the system.
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[Kazakhstan’s Banking Sector] #3 Astana Finance
Posted on June 23rd, 2009 3 comments Share/Save PrintAstana Finance (AF), which was established by the government to promote development in the capital city, was an active player in Kazakhstan’s mortgage and leasing sectors. Starting off as a residential mortgage lender, it gradually took a leading position in the agricultural leasing market as well. Initially this year things were going rather well in spite of the crisis, and earlier AF was even rumored to be interested in acquiring RBS Kazakhstan, the local subsidiary of the global banking giant.
Although AF lacks the international profile of its larger peers, it has recently been thrust into the spotlight in Kazakhstan, as in May the banking crisis hit home for bank. It was not part of the Kazakh government’s big bank bailout program earlier in 2009 - which was directed at BTA, Alliance Bank, Halyk Bank and Kazkommertsbank, the country’s four largest banks - but it became the third Kazakh lender after BTA and Alliance to default on its debt. In total, AF has $1.2 billion in foreign debt that now needs to be restructured. Predictably, the default led Fitch Ratings to downgrade AF’s long term Issuer Default Rating (IDR) from ‘CCC’ to ‘RD’ (Restricted Default).
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[Kazakhstan’s Banking Sector] #2 BTA Bank
Posted on June 15th, 2009 1 comment Share/Save PrintBTA Bank (formerly Bank TuranAlem), Kazakhstan’s largest bank, did not have a happy new year.
The first Kazakh bank to make international headlines for its precarious financial position, BTA was bailed out in February 2009 by Samruk-Kazyna National Welfare Fund, which took a 75.1% stake.
With the bailout came an overhaul in the bank’s management, as three executives fell under investigation for fraud. Former CEO and probable owner Mukhtar Ablyazov, Deputy CEO Zhaksylyk Zharimbetov and former Chairman Roman Solodchenko all left the country, although all deny the allegations, and face arrest on embezzlement charges if they return.
Things then went from bad to worse. In April BTA defaulted on $550 million in bilateral loans and stopped paying the principal on its wholesale borrowings. Standard and Poor’s downgraded both BTA’s long- and short-term credit ratings from CC/C to D (default) in response. Its current debt totals a whopping $15 billion.
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[Kazakhstan’s Banking Sector] #1 Alliance Bank
Posted on June 10th, 2009 Comments welcome Share/Save PrintFueled by cheap international capital, a consumer boom and surging oil prices, Kazakhstan’s banks had been developing rapidly prior to the onset of the credit crisis. By early 2009, however, the government was forced to bail out a sector saddled with over $50 billion in foreign debt, with President Nursultan Nazarbayev ordering the country’s sovereign wealth fund, Samruk-Kazyna, to step in to prevent a collapse.
In this series we look at how each of the major banks in Kazakhstan has been dealing with the effects of the crisis.
Alliance Bank, among the five top Kazakh banks in terms of both asset and equity size, had focused primarily on retail banking and SME lending. It was one of the first of the country’s banks to be taken over by Samruk-Kazyna earlier this year.
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The Matryoshka: Another Victim of the Economic Crisis
Posted on June 4th, 2009 Comments welcome Share/Save Print
By Julia Kosygina, Intern, The PBN Company, Washington, DC
Since their debut in the late 19th century, matryoshki - the Russian nesting dolls - have come to symbolize the country’s culture. As fashions and political regimes have changed, the appetite for matryoshki has remained strong both in Russia and abroad. Recently, however, the matryoshka industry has become yet another victim of Russia’s deepening economic crisis. According to the Independent, matryoshka sales have fallen by 90% due to an ailing tourism industry and the penny-pinching habits of domestic consumers.
Fearing the extinction of its most popular souvenir and cultural artifact, the Kremlin has decided to bail out the matryoshka and the broader handicraft industry by purchasing more than $30 million dollars worth of nesting dolls and other traditional crafts for state officials to give away as gifts - the Kremlin hopes that giving away matryoshki instead of iPods will stimulate patriotism while reviving a dying industry.
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2014 Sochi Olympics Beat the Odds…For Now
Posted on June 3rd, 2009 Comments welcome Share/Save PrintBy Alexander Seltzer, Intern, The PBN Company, London
Despite concerns relating to the global financial downturn, it looks like the Sochi 2014 Olympic Winter Games is one organization that will not be seeking a bailout this year.
Russia’s Deputy Prime Minister Alexander Zhukov announced on June 2 that funds raised by Sochi’s local organizing committee have exceeded government expectations. Private investors and foreign firms, such as Italian developer Todini Costruzioni Generali, are eager to invest in the Olympic project and have all but replaced the need for government subsidies this year.
“We have decided today that the organizing committee will not receive subsidies from the federal budget in 2009-2010,” Zhukov said in televised comments.
This is purported to save the government $88 million over the next two years, according to Zhukov. More good news followed with Zhukov also reporting that the organizing committee has a $130 million budget surplus, although he said the government would resume state financing of the Olympic project in 2011.
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Celebrating Another Victory: IMF Approves Second Loan Tranche for Ukraine
Posted on May 12th, 2009 Comments welcome Share/Save PrintBy Yulia Sobko, Financial Communications and Investor Relations Manager, The PBN Company, Kyiv
On the eve of Victory Day, the IMF gave the green light to disburse the second tranche of its loan to Ukraine. The second tranche totals $2.8 billion, bringing the IMF’s total loan to $7.3 billion to date.
Ukraine has had difficulties obtaining this second tranche. The original IMF loan agreement stipulated certain monetary and fiscal conditions to be met in time for the Q2 review for the second tranche, and many of those conditions became contentious domestic political issues. After some haggling over terms, the IMF has now met Ukraine part way, granting waivers on particularly controversial issues such as budget deficit and exchange rate, currency and import restrictions (which will now have to be removed promptly).
Under the revised terms, Ukraine is allowed a budget deficit of 4% of GDP in 2009, as opposed to the original requirement for a balanced budget, and the IMF has strongly recommended certain key structural reforms, including pension and tax reform. Ukraine’s National Bank has also committed to implement a flexible exchange rate policy and to discourage dollarization of the economy, which should mitigate the effect of external shocks on the economy and help focus monetary policy on inflation.
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Ukrainian Consensus in the Offing?
Posted on March 12th, 2009 Comments welcome Share/Save PrintNegotiations continue over IMF conditions for releasing the second tranche of the country’s $16.4bn loan. Yesterday afternoon the IMF appeared to concede on its controversial demand that Kyiv have a balanced budget, allowing for a deficit of 1%+ provided it could be financed without substantially increasing inflation. Ukrainian News quoted First Deputy Finance Minister Ihor Umanskyi as saying that additional issues yet to be resolved involve legislation on excise duties and pensions, both of which have been sources of contention among Ukraine’s leadership. Prime Minister Yulia Timoshenko said that this progress paves the way for the IMF mission to return to Ukraine as early as next week. Read more »
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Ukraine’s IMF Bailout
Posted on March 9th, 2009 1 comment Share/Save PrintToward the end of 2008 Ukraine secured a $16.4 billion bailout from the IMF to shore up its economy, and in November received the first tranche, amounting to $4.5bn. Under the terms of the loan agreement, Ukraine agreed to rein in spending and approve a balanced budget. However, shortly after the first tranche was received, Ukraine approved a budget with a deficit of 5% of GDP. The IMF cautioned the Ukrainian government that this violation jeopardized the second tranche of $1.9bn. Read more »
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