Ukrainian government took an "expensive" loan from Cargill despite its own strategy to reduce state debt UNN Victor Medved

Attracting large foreign currency loans from foreign partners contradicts the Medium-Term Public Debt Management Strategy for 2019-2022. Economic expert Viktor Medvid said this in a commentary to UNN, commenting on the loan from the American corporation Cargill agreed by the Ukrainian government.

It should be noted that over the past year, Ukraine has twice raised loans from the private company Cargill. Thus, in October 2019, it was about two loans totaling about EUR 250 million: for two years at 5.15% per annum and for five years at 6.25% per annum. Recently, the Cabinet of Ministers has again approved loans from Cargill totaling up to EUR 250 million: for three years at 5.95% per annum and for five years at 6.85% per annum.

"It should be noted that interest rates are higher than they were last year. Despite the fact that we have a Medium-Term Public Debt Management Strategy for 2019-2022 approved by the Ministry of Finance. The essence of the strategy is to prioritize the replacement of the lending currency with the national currency, to reduce interest rates, to extend the maturity and to change the structure of the debt from international to domestic. It is unclear why, despite the strategy approved by the Ministry of Finance, the government is still borrowing such funds from Cargill," the expert says.

The expert reminded that Ukraine is also placing domestic government bonds. The rates on foreign currency government bonds placed by the government are lower than the interest on Cargill's loans.

"Moreover, there are no problems with the placement of domestic bonds - in fact, all bonds are quite well sold on the market. Therefore, raising another quarter billion loan from Cargill looks strange against the backdrop of the untapped potential of domestic government bonds," he added.

During the year, interest rates on Cargill's loans increased by about 0.7%. In monetary terms, this is about $1.5 million, or UAH 40 million per year, Medved says.

"The funds will not be superfluous for Ukraine. In my opinion, now the Ministry of Finance, which was instructed by the Cabinet of Ministers to raise loans from Cargill, should motivate the rationality of such loans. In terms of rising interest rates and violation of the principles of the public debt reduction strategy," the expert added.

According to media reports, every able-bodied Ukrainian already owes about UAH 150 thousand to creditors.

Earlier, UNN reported that the American corporation Cargill is engaged in agricultural activities in Ukraine and has repeatedly been involved in scandals. In particular, Cargill was found guilty of tax evasion schemes and illegal transactions on Delta Bank loans, as a result of which depositors lost money.