Due to the restrictions imposed by the National Bank, large businesses in Ukraine are unable to access Western capital markets and thus cannot pay their creditors. Oleksandr Vodoviz, Head of the Project Office of the CEO at Metinvest Group, discussed this in a column for Ekonomichna Pravda.
For over two years, Ukrainian businesses have been operating under strict currency restrictions imposed by the National Bank right after the russian invasion of Ukraine. Initially, this helped stabilize the financial system of the war-torn country, and over time, the regulator began easing currency controls.
The biggest set of relaxations was implemented in May 2024. For the first time since 2022, businesses were permitted to transfer currency abroad to pay off loans and dividends. However, this decision proved to be very restrictive and does not enable businesses to expand, as transfer limits were set at only a few million dollars per year.
Big businesses have been anticipating this decision for a long time, but they are unable to benefit from it as it does not take into account the specifics and scale of their operations. At the end of last year, Metinvest's loan portfolio was around $2 billion, with 95% of the borrowings sourced from the West.
We lack access to Western capital markets, but we have commitments to creditors and must pay $250-300 million annually. Therefore, the NBU's relaxation of currency restrictions, with a limit of $4 million per year, does not have a significant impact on major players, who are the primary debtors of Western banks and other financial institutions.
Most large companies in the Ukrainian economy are facing a similar situation. Consider Ferrexpo, ArcelorMittal Kryvyi Rih, Interpipe, or Kernel, for example – each of these companies has a loan portfolio exceeding one billion dollars, yet none of them can secure foreign borrowing.
To meet loan payments, we have to explore unconventional solutions. Currently, Metinvest is securing trade finance through its overseas sales offices. We are replacing long-term funds with short-term ones, and this doesn't make sense.
This situation cannot continue indefinitely. A sequence of defaults will begin, affecting the country's overall ratings. The russians prevent their corporate borrowers from defaulting for a reason—they understand it impacts borrowing costs for the entire country.
We understand that the NBU wants to prevent a significant outflow of funds to foreign countries. The regulator has all the necessary tools to control fund movements and can stop any illegal outflow of capital if necessary. In particular, you can trace the company's payment chain. If the money was not used to pay off debt, the company can be fined and banned from further foreign exchange transactions.
Ukrainian businesses face challenges beyond just accessing credit. They also struggle to secure financing that covers the risks associated with war.
We believe that international financial institutions and our partners could assist in finding a feasible solution in this situation. Metinvest is in communication with the Ministry of Economy to secure funding for this purpose through the Ukraine Facility, which includes a €7 billion investment component.
Also, visit Ekonomichna Pravda's website for more details.
