RESOLUTION OF THE CABINET OF MINISTERS OF UKRAINE

of August 1, 2012 No. 815

About approval of the Procedure of control of the risks connected with public administration (local) debt

Cabinet of Ministers of Ukraine decides:

Approve the Procedure of control of the risks connected with public administration (local) debt which is applied.

Approved by the Resolution of the Cabinet of Ministers of Ukraine of August 1, 2012, No. 815

Procedure of control of the risks connected with public administration (local) debt

1. This Procedure determines the methodological and organizational principles of control of the risks connected with public administration (local) debt (further - debt).

2. Terms which are used in this Procedure have such value:

the budget risk - risk of considerable underfulfilment of revenues of the government (local) budget that can lead to increase in amount of the state (local) borrowings and/or default on obligations of debt servicing;

currency risk - risk of change of the official rate of national currency to foreign currency in which are nominated or obligations on debt are indexed;

interest risk - risk of increase of the floating interest rates provided by conditions of current commitments on debt;

transactions on debt management - the transactions directed to reduction of the risks connected with debt management and/or economy of means of the government (local) budget;

liquidity risk - risk of temporary lack of funds of the government (local) budget for accomplishment of obligations on debt as a result of possible bystry reduction of amount of quick assets as a result of emergence of unforeseen current monetary commitments and/or difficulties with operational attraction of financial resources by borrowings;

the risk of refinancing - risk of reduction of reservoir of the capital markets which makes impossible borrowing in the amount necessary for refinancing of debt at reasonable price and leads to value addition of borrowings;

the risk connected with debt management - risk of approach of event (circumstance) which will lead to increase in the expenses of the government (local) budget connected with repayment and debt servicing and reduction of amount of the state (local) borrowings.

3. During control of the risks connected with debt management, the Ministry of Finance (local financial body):

carries out risks assessment for the purpose of their minimization;

determines optimum ratio of the expected expenses of the government (local) budget by debt management to risks;

performs operations on debt management.

4. The risks assessment, connected with debt management, is carried out on the basis of data about:

accounting and results of monitoring of debt;

current macroeconomic situation (including indicators of budget and tax, monetary and monetarist policies);

situation in domestic market of government securities and/or bonds of local loans and world market of the capital;

balance resource estimation of the general fund of the government budget, prepared by Treasury;

the prospects of development of world economy, prepared by nauchnoissledovatelsky organizations, international financial institutions, investment banks and the companies, other financial institutions.

5. The risks assessment, connected with debt management, is carried out by control of indicators percentage, currency, budget is risky, and also risks of refinancing and liquidity.

6. The Ministry of Finance (local financial body) approves the management program long for the corresponding year and will promulgate it after the beginning of the corresponding budget period on the website of the Ministry of Finance in a month (in the official printing publication of local government body).

The management program can be reviewed by debt in case of essential changes in the domestic market of government securities and/or bonds of local loans and the world markets of the capital, in macroeconomic situation, budget and tax, monetary and monetarist policies, and also emergence of other reasons which can complicate or make considerably impossible its accomplishment.

7. The Ministry of Finance (local financial body) prepares not later than in three months after the end of budget period the report on accomplishment of the management program by debt for accounting budget period and will promulgate it on the website of the Ministry of Finance (in the official printing publication of local government body).

The report on accomplishment of the management program debt shall contain information about:

debt condition for the end of accounting budget period;

situation and the main tendencies in domestic market of government securities and/or bonds of local loans and the world markets of the capital, essential changes in macroeconomic situation for accounting budget period;

the results of risks assessment connected with debt management, condition for the end of accounting budget period;

implementation of the planned actions and achievement of the indicators determined in the management program by debt and also the reasons and reasons for variations of such indicators.

8. By results of determination of optimum ratio of the expected expenses of the government budget on debt management to the risks connected with national debt management, the Ministry of Finance includes in the medium-term strategy of national debt management regarding risk management:

planned targets of the government budget on national debt management;

methods of borrowings which are planned to be used for financing of the government budget;

forecast values of ratio of external and internal debt, floating and fixed interest rates;

forecast weighted average repayment periods of external and internal public debt before commercial creditors, amounts of transactions on management of such debt.

The forecast weighted average repayment period is determined separately for external and internal public debt and displays optimum ratio of risk of refinancing to debt service cost which is calculated on the basis of the current yield curve of government securities.

9. By results of determination of optimum ratio of the expected expenses of the local budget on management of local debt to the risks connected with management of such debt, the local financial body includes in the draft of the forecast of the local budget for the following for planned two budget periods:

forecast indicators of the local budget on management of local debt;

limiting amounts of local debt and provision of local guarantees, methods of borrowings which are planned to be used for financing of the budget of development;

forecast values of ratio of external and internal local debt, floating and fixed interest rates;

forecast weighted average repayment periods of external and internal local debt, amounts of transactions on management of such debt.

10. During the choice of method of borrowing the public (closed) placement of government securities, bonds of the local loan is priority before the syndicated (bilateral) loans.

During the choice of terms of borrowing the Ministry of Finance (local financial body) shall adhere to the principle of uniform loading of payments on repayment of external and internal debt.

11. For control of the risks connected with national debt management, the Ministry of Finance can perform operations on:

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