You're reading: Investors not warming up to future war bonds issue

In addition to Defense Ministry’s fundraising drive that has raised Hr 100 million as of April 15, the Ukrainian Ministry of Finance is about to issue internal war bonds worth Hr 1.1 billion to support the nation’s military. As unrest in the eastern region continues and the army prepares for military action, cash is strongly needed to cover expenses.

There has been a lot of noise in the social media over
lack of food and other products in Ukrainian military units being deployed for anti-terrorist
action. Massive criticism led to the previous acting Defense Minister Igor
Tenyukh’s resignation on March 25.

Two-year bonds will be placed twice: Hr 1 billion and Hr 100
million, both with a 7 percent interest rate. State-owned Oshchadbank will sell
the securities to both institutional investors and the general public.

However, analysts do not foresee great demand for
those bonds as, for instance, government 70-days bonds have 9.95 interest rate
and thus provide a substantially greater return. “Money will not be raised,”
said Dragon Capital fixed income sales Sergiy Fursa. The local bond market is
experiencing some hard times and friendly state-owned banks purchase most of
the government securities, he added.

But the government is drawing more on patriotic
sentiment than investor moods when issuing the bonds. As a general rule a
securities account must be held to purchase bonds.

During World War I, Austro-Hungary and Canada issued
special military bonds to finance their armies.

Russian media has been quite sarcastic about the Ukrainian
Finance Ministry’s intention to borrow money on the market for military
purposes. “Ukraine sharply lacks money, but can’t borrow them. What can Kyiv
authorities do in such a situation? Of course, to play on people’s patriotism
and issue so called war bonds,” wrote Vesti Ekonomika website which is closely
related to Russia 24 television station whose untrue reporting and anti-Ukrainian
propaganda has been widely discussed in the world media.

Meanwhile, the Defense Ministry’s “Support
the Ukrainian army
” drive has raised more than Hr 100 million for the
country’s military needs, with Hr 24 million coming through the 565 mobile number.
Dialing or texting that number automatically donates Hr 5 to Ukraine’s war
cause and seems to be quite popular among Ukrainians. It’s a much more
convenient way to donate to the national army than buying bonds, explained Dragon
Capital’s Fursa.

Kyiv Post associate business editor Ivan Verstyuk can be reached at
[email protected].