Ukraine swapped its overdue VAT refund debt to domestic bonds once again

Overdue VAT debt of the period of November 1, 2003 till June 1, 2004 will be swapped to 5-year domestic government bond loans. This will happen in case if the overdue debt is not redeemed by the time of commencement of the Law Alteration Act on public budget of 2004 which passed on Thursday.

At the same time, the deputies made a decision not to swap the VAT refund debt on operations with wheat, rye and their mixes. The above mentioned Law Alterations will come into force after the President’s enactment.

The public budget law allows 5-year government bond issue as a part of VAT refund debt restructuring in amount of 1926 mln hryvnyas - the debt accrued by November 1, 2003 and not redeemed by January 1, 2004.

The bond yield will be calculated based on 120% of the Ukrainian National Bank’s rate (at present it is 7.5% p.a.) and 20% of the net amount will be paid once a year on December 31.

According to the data of State Tax Administration of Ukraine, the overdue budget debt amounted to 1079.9 mln hryvnyas as of November 1, 2003. VAT bonds are in demand among banks as its yield (over 20% p.a.) is almost twice higher than other government bonds’ yields.