Government Takes Another Step towards Implementing Best Practices in Public debt Management

On September 13, the Government adopted a resolution “On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated January 31, 2001, No. 80.” This draft resolution was developed by the Ministry of Finance to enhance the efficiency of managing domestic public debt.

The Resolution was adopted with the goal of implementing the Medium-Term Public Debt Management Strategy for 2024-2026. It allows the Ministry of Finance to carry out switch operations – active debt management operations conducted through auctions for the issuance of government bonds with a simultaneous exchange for other outstanding bonds from different issuances.

This improvement in auction procedures has been long discussed with market participants and will enable holders of domestic government bonds to exchange less liquid bonds or bonds nearing maturity for newly issued bonds offered at regular auctions.

The implementation of these changes will allow the Ministry of Finance to take a more flexible approach to liquidity management by proactively exchanging short-term bonds nearing maturity for new ones. This will help reduce the one-time payments from the Unified Treasury Account during bond redemption.

Switch operations are a standard practice in the local debt markets of European countries, helping to increase market liquidity and improve the government's liquidity management. These operations will be conducted regularly via the Bloomberg Auction System, which is already used for holding regular domestic government bonds auctions.

“As part of our strategy to develop the domestic government bond market and create active tools for public debt management, we are pleased to announce the launch of switch operations – the exchange of domestic government bonds. This innovation will make reinvestment of bond maturities much more efficient, which, in turn, will help smooth out the redemption profile. Now, the Ukrainian domestic bond market will have access to a tool that has long been used in similar markets of other countries,” commented Yuriy Butsa, the Government Commissioner for Public Debt Management.