The Ministry of Finance of Ukraine recently bought back approximately 10% of eurobonds maturing in September 2022, as a result of which their volume in circulation decreased to $912 million, the ministry said on Friday.

"The Ministry of Finance of Ukraine has carried out several operations to repurchase VRIs, as a result ... as of February 4, 2022, the Ministry of Finance owns about 20% of the total nominal amount of securities," the document also says.

In it, the Ministry of Finance emphasizes that such operations for the active management of state obligations in favorable market conditions are provided for by the medium-term strategy for managing the state debt of Ukraine for 2021-2024 and are aimed at smoothing the debt service profile and reducing the peak burden on the state budget. Funds for the redemption of VRIs are also provided for in the state budget, the miinistry said.

"The Ministry of Finance currently does not intend to resell securities tied to GDP," the message also says, according to which the redeemed eurobonds were cancelled.

Earlier it was indicated that in the context of escalation of the military threat to Ukraine from Russia and the sale of Ukrainian assets caused by it, the cost of eurobonds 2022 fell on some days below 90% of the face value, and their yield to maturity jumped to 26.5% per annum.

The price of VRIs in January fell to 66.7% of the nominal compared to 90.7%-95.3% in December and over 100% during almost all other months of the last year. However, some stabilization of the situation and, possibly, active operations of the Ministry of Finance, led to the recovery of their prices to 76.7%, and eurobonds 2022 - to 97.1%.

According to the report of the State Treasury, in December the Ministry of Finance allocated about $170 million for the purchase of VRIs, which, taking into account their prices of that period, allows to estimate the volume of their purchase at about 5.7% of their total volume.

In August 2020, the Ministry of Finance announced the repurchase of about 10% of VRIs, when the securities were quoted at about 86% of the face value.

In the same year, the Ministry of Finance carried out an active operation with external public debt, issuing new eurobonds with a maturity in 2033 in the amount of $2 billion at 7.253% at the end of July, and redeeming and exchanging eurobonds with an interest rate of 7.75% and maturity in 2021 and 2022 in the amount of $435.14 million and $370.34 million, respectively.

In the state budget 2022, expenditures under payments on VRIs amount to about UAH 1.4 billion, or about $50 million.

Value recovery instruments (VRI) were issued as part of the restructuring of Ukraine's public debt in 2015 instead of eurobonds for a nominal amount of about $3.239 billion (20% of the restructuring volume) and are not part of the country's public debt. Payments under VRI are made annually in cash in U.S. dollars, depending on the growth dynamics of Ukraine's real GDP in 2019-2038, but after two calendar years, that is, between 2021 and 2040.

If GDP growth for the year is below 3% or real GDP is less than $125.4 billion, then there will be no payments on securities. If the growth of real GDP is from 3% to 4%, the payment on securities will be 15% the value of the GDP growth between 3-4%, and if it is higher than 4%, then 40% of the value of the GDP growth above 4% is paid. In addition, payments are capped at 1% of GDP from 2021 to 2025. The absence of any restrictions on payments after 2025 in the event of rapid GDP growth has been criticized by individual politicians and experts within the country.

Taking into account the quotes in December and the volume of expenditures made, it is possible to roughly estimate the volume of new redemption of VRIs at about 5.7% of their total volume.

In 2020, Ukraine's GDP decreased by 4%, so there will be no payments on them this year. Experts estimate the growth of Ukraine's GDP for 2021 at 3.2-3.3%, which corresponds to payments in 2023 of UAH 1.3-2.4 billion (UAH 1.04-1.92 billion, taking into account the securities bought by the Ministry of Finance).