At country level, all countries sell bonds to pay for their infrastructure and carry on the normal business. People buy the bonds because the government has the ability to tax its citizens or raise money to pay the interest and principal. However not all countries are equal and that is reflected in the interest rates, bond holders demand for the use of their money.One of the countries that is not equal is Ukraine.
In an article by Andrew Kramer of the New York Times News Service, Ukraine has struggled to raise money on bond markets paying investors more than it is collecting, Ukraine’s is very dependent on foreign aid to pay the bills.
Every day, it seems Russia is sending drones into Ukraine and some of them hit infrastructure of energy and every day Ukraine fixes or attempts to fix the energy distribution channels for people to have power. Not surprisingly, the steel making mills and the agricultural sector have been damaged by the war.
Since Russia invaded on February 24, Ukraine has not been able to roll over its debt accumulated before the war. The country paid investors $2.2 billion more than it collected according to the Central Bank of Ukraine.
The Finance Ministry has sold $6.7 billion in bonds since the war started. The Central Bank has maintained a lending rate, averaging about 25% higher than the Ukraine bond yields, which have been around 15%.
Ukriane’s budget is expecting a $36 billion deficit. War is expensive as half as the budget is for the army, police and military outlays.
Why does the west prop up Ukraine, if it does not, prolong instability in Europe would be more costly according to Professor Tymofiy Mylovanov, a professor of economics at Kyiv School of Economics.
Linking to dividend paying stocks, personally you may want to support a company or a cause but from an investors point of view, you should stay away from some investments. One of the toughest decisions you will make it the new year is how to say no and protect your investments. There are many great causes to support, and you can do that with your dividend if you want to. From an investment point of view, you need a clear line when you say no to possible opportunities.
There are more questions than answers, till the next time – to raising questions.