I am often asked: how to make money in Ukraine during the war?
First, a quote: “The profitability of Ukrainian sovereign Eurobonds with maturity in 2024 (as of February 16, 2022) amounted to 303%. Eurobonds with maturity in 2025-2026 are quoted with a profitability of 91-130%, longer bonds with a profitability of 48%-77 Bonds become cheaper by 10-15%, having lost the growth of October-November, and are traded at 15-20 cents per dollar.
The key reasons for the increase in profitability are the increase in the risk assessment of Ukraine as an issuer against the backdrop of a potential escalation of the war in the spring and the corresponding decrease in business activity.
Moddy’s on February 14 downgraded its sovereign credit rating from Caa3 (high credit risk) to Ca (probable default). However, expectations were revised from negative to stable. The company predicts that the war will not allow Ukraine to recover in 2023 – expecting a 2% decline in GDP, and breaking the trend in 2024, thanks to the reconstruction of the destroyed infrastructure … “
And now a simple commentary on investment during the war for our fellow citizens. Here is just one of the answers!
Ukrainian Eurobonds show a yield of hundreds of percent per annum in euros! This is natural for countries where there is a war, and foreign investors are waiting for a probable default.
And why don’t Ukrainians who believe in their State and its victory earn a hundred percent per annum in euros? On our own government securities?
In the hands of the population more than 80 billion dollars in cash. Another 15 billion dollars is on the population’s foreign currency accounts in banks, which bring them 1% per annum. Now foreign investment funds are earning more than a hundred per annum, and not soldiers and sergeants of the Armed Forces of Ukraine, who do not know where to invest their savings, their wages received at the front! And not ordinary citizens of Ukraine who work in the rear!
Why do foreign investment funds earn, not Ukrainians
Because even before the war, Ukrainians did not achieve one of the key economic freedoms: the freedom to manage their money, honestly earned, on which taxes have already been paid!
Because the Ukrainians had a limit (and special licensing) on the amount of investment even before the war. And there is a limit on cross-border transactions (introduced since the beginning of the war).
An important clarification: these tens and hundreds of percent will not be paid to buyers by our war-bled state budget! The Ministry of Finance both paid and will pay only face value and a fixed coupon percentage (6-7%) when redeeming its Eurobonds. The crazy profitability of our sovereign bonds on the European market today is born at the expense of the same proportionate losses of foreign investors, who are getting rid of our bonds in the market in a panic!
Because they do not believe in Ukraine or in our victory! And we believe! Is not it? At the same time, we believe so much that we are ready to risk our money, buying them when everyone else is selling, and earn the interest for the risk that I wrote about above.
Why can’t we do this? Because before the war we missed the attack on our economic rights and freedoms! Because we strongly supported all the restrictions on investing abroad, directed against the “oligarchs”, which the Verkhovna Rada implemented year after year! And now we ourselves are deprived of this sacred right to freely dispose of our own money, which has already been taxed!
Can this be changed
Of course yes. True, with one caveat: during the war, restrictions on the purchase of foreign currency (dollar or euro for hryvnia) are expedient so as not to stimulate additional pressure on the exchange rate.
However, I do not see any “macroeconomic damage” in the fact that Ukrainians could earn on Ukrainian Eurobonds from their foreign currency accounts. By investing their foreign exchange savings that they already have.
Prohibiting Ukrainians (both individuals and companies and domestic banks) from buying Ukrainian sovereign Eurobonds is not just an atavism. This is meanness in today’s world.
Panicking foreign investors are ready to incur losses on our Eurobonds. Ukrainians who believe in Ukraine and its victory are ready to make money on it!
What’s stopping you? Artificial restrictions and regulations that the National Bank and the CMU can remove with one resolution in one day (even no laws need to be adopted in the Rada). So, back to the question: what’s stopping you?
And the inability of the authorities to think as a priority of the economic freedoms of the population and business of the country interferes! At least in such matters as Ukrainian access to the market of Ukrainian Eurobonds. Which, I emphasize once again, has no conflict of interest with the issue of filling the state budget! The budget, in general, only benefits both in the short and long term from the expansion of the circle of investors in Ukrainian government bonds at the expense of the broad strata of our population! Therefore, we repeat the question again: what prevents?
Source: www.minfin.com.ua
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