FOREIGN CREDITS TO KEEP HRYVNIA AFLOAT

Mykola Azarov, head of the State Tax Administration, says that budget returns in January were considerably less than last year's. The National Bank spent over Hr 150 million last week to purchase domestic government bonds which had not been popular with private buyers since last fall (it should be remembered that NBU has no right to give the government direct loans, known in the local legalese as "emissions"). Besides, NBU had to part with huge sums at the Ukrainian Interbank Currency Exchange, because hard currency supply from the banks was nil, and Western ex-holders of domestic government bonds strove to return to the dollar once they got their domestic bond yields.

The Cabinet and President decided to solve the problem in the now traditional way. The Chief Executive issued yet another budget edict and NBU, together with the Cabinet, published a statement on an extended hard currency corridor. Nothing but an image-building campaign in the eyes of Western investors. But it looks like Kyiv officialdom has once again convinced the West that they are set on and faithful to market reforms.

On January 28, the IMF Board adopted a new version of its Memorandum on Ukraine's Economic Policy in 1998, sanctioning another Stand-by tranche worth some $50 million. Moreover, Cabinet sources report that the Ukrainian delegation has agreed on the new Memorandum text stipulating reduced NBU foreign exchange reserves, higher anticipated inflation, and a 1.8-2.25 UAH/USD exchange rate corridor for 1998, reports the Ukrainian News Agency.

The positive outcome of talks with IMF inspired the Cabinet to return to the plan of Ukrainian securities expansion on Western markets. Despite the world financial crisis and attendant distrust of securities originating from developing countries, the Ukrainian Finance Ministry is planning to issue foreign currency denominated bonds sometime in February. The government is expected to allocate securities on a private basis, with the Swiss SBC Warburg acting as lead manager. The loan will amount to $150 million. All told, Ukraine will receive $350 million in January-February 1998.

As for "domestic reserves" meant to patch up the state budget, the Cabinet could only count on increased excise payments or on adding new excise duties. One of the bills envisages a rise in the tobacco excise rate which looks like the first robin, except that it will not greet people with warmth and sunshine, rather to the contrary.