#10000000 Ukraine: Investor Presentation June 2021 MINISTRY OF FINANCE OF UKRAINE#2Disclaimer IMPORTANT: You must read the following before continuing. In accessing this document ("Information"), you agree to be bound by the following terms and conditions. The Information is not an offer or invitation to, or solicitation of, any such distribution, placement, sale, purchase or other transfer of any securities in the territory of Ukraine. The Information does not constitute or form part of, and should not be construed as an offer or the solicitation of an offer to subscribe for or purchase any securities, and nothing contained therein shall form the basis of or be relied on in connection with any contract or commitment whatsoever, nor does it constitute a recommendation regarding any securities. The Information contains forward-looking statements. All statements other than statements of historical fact included in the Information are forward-looking statements. Forward-looking statements give Ukraine's current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. These statements may include, without limitation, any statements preceded by, followed by or including words such as "target," "believe," "expect," "aim," "intend," "may," "anticipate," "estimate," "plan," "project," "will," "can have," "likely," "should," "would," "could" and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond control of the Ministry of Finance of Ukraine that could cause actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. 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June 2021 2#3Ukraine's economy: dynamics of selected indicators 2015 2019 Real GDP growth (9.8)% 3.2% $ Consumer 43.3% 4.1% inflation (eop) น % Reserves (eop) Primary state budget balance1 State debt to GDP Today (2.2)% (Q1 2021) 9.5% (May 2021) US$ 13.3bn (eop) US$ 25.3bn (eop) US$ 27.8bn (Jun 1, 2021) 2.0% of GDP 1.0% of GDP 67.1% 44.3% Note 1 Primary state budget balance defined as state budget revenues minus expenditures excl. debt service and minus net lending Note 2 Estimated based on primary state budget balance of UAH 12.7bn during Q2 2020 - Q1 2021 and actual nominal GDP of UAH 4,349bn during Q2 2020 - Q1 2021 Note 3 Estimated based on actual state debt of UAH 2,235bn as of Mar 31, 2021 and actual nominal GDP of UAH 4,349bn during Q2 2020 - Q1 2021 Sources State Statistics Service of Ukraine, NBU, State Treasury June 2021 0.3% of GDP2 (Q1 2021) 51.4%³ (Q1 2021) 3#4June 2021 1 Solid foundation for long-term economic growth 2 Return to gradual fiscal consolidation 3 Prudent debt management strategy 4 5 Reviving business climate and development prospects Strong focus on ESG considerations 4#5June 2021 Accumulated economic buffer to curb Covid-19 crisis (1/2) 2020 GDP in current prices US$ 156bn GDP per capita dynamics, US$ 2017 US$ 2,640 +17% Comments In 2020, Ukraine's real GDP has declined by 4.0% which is significantly lower than projected by the government (-4.8%) and the IMF (-7.2%). In Q1 2021, the real GDP has contracted by 2.2% YTD 2021, the key economic sector outputs started to return to upward trend with industrial production showing the increase (1.5% y-o-y in Apr 2021), while construction index is still negative (-5.3% y-o-y in Apr 2021), followed by agriculture (-4.5% y-o-y in May 2021) Despite Covid-19, the private consumption remained strong in Q1 2021 after quick return to growth in Q3 2020, while the fixed capital accumulation remains negative Real GDP growth (y-o-y)², % 4.6% 4.7% 3.8% 3.4% 3.2% 2.4% 2.5% (4.0)% US$ 3,097 2018 +18% 50% 2019 US$ 40% 3,663 30% 20% +2% 10% 0% (10%) US$ 3,727 2020 (20%) Jan Key economic sectors output growth (y-o-y)¹, % Agriculture Construction Industrial production index Jan-Jul Jan-Apr Jan-Oct Jan 2016 Jan-Apr Jan-Jul Jan-Oct Jan Jan-Jul Jan-Oct Jan-Apr Jan Jan-Apr Source State Statistics Service of Ukraine Jan-Jul Jan-Oct Jan Jan-Apr Jan Jan-Apr 2017 2018 2019 2020 2021 1 2 2016 2017 2018 2019 2020 2021E 2022E 2023E Sources State Statistics Service of Ukraine Component contribution into real GDP growth, % 7.4% 7.0% 6.3% 5.9% 2.8% 2.5% 1.8% 2.3% 2.0% 3.9% 3.8% 1.2% 1.5% (0.9)% (4.5)% Private consumption (3.2)% (3.8)% (5.3)% (3.9)% ■Gross fixed capital accumulation (5.9)% (7.5)% 2016 2017 2018 2019 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Source State Statistics Service of Ukraine Notes To the corresponding period of the previous year on a cumulative basis 2021-2023 data according to the latest Ministry of Economy's projections 5#6June 2021 Accumulated economic buffer to curb Covid-19 crisis (2/2) Comments The key contributors to industrial output increase in April 2021 are production of furniture (+15.7%), production of chemicals (+9.7%), and textile (+8.5%) Gross fixed capital went down by 7.8% in Q1 2021 on the back of the economic disruption caused by Covid-19 Despite 38.2% capital investments decline in 2020, the consistent growth in the previous periods (15%+ y-o-y in 2016-2019) is expected to solidify Ukraine's prospects for quick economic recovery post Covid-19 outbreak . Industry has been the major contributor to capital investments in 2020 accounting for c.37% followed by construction and agriculture with 9% shares both Gross fixed capital accumulation, % (y-o-y)1 40% 27% 30% 20% 21% 22% 18% 13% 10% 5% 0% (10%) (20%) (30%) 15% 17% 7% 19% 13% التابلات TIP (23)% (8)% (27)% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20 '20 '20'21 Capital investments split by sector for in 2020, % Source State Statistics Service of Ukraine Capital investments dynamics UAH bn 326 413 526 584 420 ■Industry 19% ■Construction 22.1% 18.0% 16.4% 15.5% 37% ■Agriculture 13% US$ 15.6bn ■Trade 23 19 16 16 Transport 13 6% 7% 9% State administration and security (38.2%) 9% Other 2016 2017 2018 Source State Statistics Service of Ukraine 2019 Real growth, % 2020 BA Capital investments, US$ bn Source State Statistics Service of Ukraine Note 1 To the corresponding period of the previous year on a cumulative basis 6#7June 2021 Despite economic downturn, consumer demand remains firm Comments Over recent years, consumer demand was consistently driven by a number of factors, including steady rise in real wages, improving consumer sentiments (before Q1 2020), growing personal money remittances Despite economic crisis caused by Covid-19, real wages growth was mainly resilient and reached 19.7% y-o-y in Apr 2021 30% 20% 10% 0% (10%) Covid-19 also had limited impact on the retail trade: its turnover growth increased to 14% in Apr 2021 from just above 8% as of Dec 2020 (20%) (30%) (40%) Final private consumption grew by 5.3% and 4.4% y-o-y in Q4 2020 and Q1 2021, respectively, after a 10.0% y-o-y decline in Q2 2020 Private consumption and consumer sentiments evolution Real wages growth (%) and avg monthly nominal wages (UAH) 16,000 13,54314 14,000 19.7% 12,000 10,000 8,000 6,000 4,000 Real wages index Average monthly nominal wage, UAH 2,000 0 Feb-17 Apr-17 Jun-17 ⠀⠀ Source State Statistics Service of Ukraine Retail trade growth (y-o-y)¹, % 100 97.5 20% 16% 90 12.2% 11.7% 82.4 15% 14% 80 70 59.4 60.3 62.2 12.9% 65.1 67.8 10% 12% 10.6% 60 50.6 5% 10% 8.8% 6.9% 50 5.3% 2.7% 4.4% 0% 8% 40 (1.8%) (5)% 6% 30 20 (10)% 4% (10.0%) 10 (15)% 2% 0 (20)% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 '16'16'16'16'17 '17 '17 '17 '18 '18 '18 '18'19'19'19'19'20 '20 '20 '20 '21 Consumer sentiments index, eop (lhs) Private consumption growth y-o-y, % (rhs) Source GFK, State Statistics Service of Ukraine Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 5.5% Dec-18 Mar-19 10.3% 14.0% 13.5% 3.1% Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Note 1 To the corresponding period of the previous year on a cumulative basis Source State Statistics Service of Ukraine Dec-20 8.4% Mar-21 BA 7#8June 2021 Revival of external trade in 4m 2021 Comments The international trade has started to recover after disruptions caused by global Covid-19 pandemic: Ukraine's goods trade turnover has increased by 18% y-o-y in 4m 2021 (to US$ 37bn) The total export and import of goods and services have reached US$ 22.6bn and US$ 22.9bn in 4m 2021, respectively Exports of goods and services have risen by 12.8% y-o- y in 4m 2021 with ferrous and non-ferrous metals as well as mineral products being the key drivers of such development Imports of goods and services have increased by 13.4% y-o-y in 4m 2021 with machinery and equipment development, chemicals, and mineral products contributing the most Geographic structure of goods trade in 4m 2020 & 4m 20211 Export and import of goods and services dynamics, US$ bn Export (4%) 39% 69% 7% 32% 19% 27% Y-o-y change in export, % 17% 2% 7.57.2 4m 2020 4m 2021 4.2 3.0 2.7 1.6 1.11.2 0.50.7 0.60.8 0.20.3 0.30.4 5.15.2 Food and Ferr. and Mineral Machinery Timber Chemicals Industrial Other Services agri non-ferr. products and and wood products metals 0.91.0 goods equipment products 0.40.5 0.60.7 0.91.0 4m 2020 2.1 4m 2021 2.5 17% 2.8 ■ EU countries 3.3 17% 3.4 3.6 4.0 4.2 37% 8% US$ 31bn in 37% ■Asian countries 4.8 8% 4m 2020 ■ Russia 6.1 6% 7% US$ 37bn in 4m 2021 ■ Other CIS 15% 17% 19% 28% 47% 16% 9% 15% (14%) 32% 37% ■ Other Import Y-o-y change in import, % Source NBU Notes 1 Source Ministry of Economy BA Sum of export and import of goods 8#9Firm external position leading to less vulnerability to external shocks June 2021 Comments The trade balance deficit amounted to US$ 0.3bn in 4m 2021 which is relatively comparable to US$ 0.1bn in 4m 2020. Slight increase in the deficit is resulting from a slightly higher growth in imports (by 13.4% y-o-y) vs exports (by 12.8% y-o-y) The current account (CA) balance demonstrated surplus of US$ 1.1bn in 4m 2021 which is lower than US$ 3.5bn during the same period of the previous year mainly due to outflows related to investment income (US$ 3.9bn in 4m 2021 vs US$ 1.6bn in 4m 2020) The financial account continued to record capital outflows (US$ 1.3bn in 4m 2021) which was primarily due to a souring of global financial conditions for EMs Balance of payments components, US$ bn BoP, 2.6 2.8 5.9 2.0 0.6 (0.2) US$ bn (3.5) 10.1 9.3 6.1 (6.5) 2017 2018 6.2 3.5 1.1 (1.3) (2.9) (4.1) (4.2) 2019 2020 4m 2020 4m 2021 Private money remittances, US$ bn 22.9% 19.9% ■Current account balance ■Financial account balance Ukraine's current and trade balance dynamics, US$ bn CA as % of GDP (3.1)% 53.9 (4.9)% 59.2 (2.7)% 63.5 4.0% 60.6 (1.2%) 22.6 20.0 11.9 11.1 7.3% 9.3 (7.8%) (8.7%) (20.2) (22.9) (8.2%) (0.3%) 3.7 4.0 (62.7) (62.4) (70.6) (76.0) 2017 2018 2019 2020 4m 2020 4m 2021 Personal money remittances, US$ bn 2017 2018 2019 2020 4m 2020 4m 2021 Remittances y-o-y change, % Export of goods and services Import of goods and services Trade balance (% of GDP) BA Source NBU 9#10June 2021 Prudent monetary policy implemented by independent regulator Medium-term consumer inflation target range: 5%+/-1% Y-o-y inflation as of May 2021: 9.5% Comments The NBU has significantly softened its monetary policy maintaining the cycle of key policy rate cuts until June 2020 on the back of UAH appreciation and decelerated inflation During July 2020 - February 2021, the NBU has decided to keep its key policy rate at 6% to curb the price growth as the economy recovers in 2021-2022, while leaving room for its further decrease In March-April 2021, the key policy rate was raised twice by 1.5 p.p. in total in order to respond to the growing inflation In March-May 2021, consumer inflation came out higher than had been projected previously. Inflationary pressures were generated by the rise in prices for certain foods and fuels and sustained consumer demand. CPI expectations for the following 12 months Consumer price index (CPI) change and key policy rate 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 NBU's medium-term inflation target range CPI, y-o-y, % Key policy rate, % UAH/US$ and UAH/EUR exchange rates dynamics Source NBU 16% 14% 12% 10% 8% 6% 4% 2% 0% Mar-18 Banks May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Businesses 38.0 36.0 34.0 32.0 9.7% 30.0 7.0% 6.6% 28.0 6.5% 26.0 24.0 22.0 20.0 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Households Jan-21 Mar-21 May-21 - Financial analysts Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Notes 1 As of June 24, 2021 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 EUR US$ Sep-20 Nov-20 Jan-21 Mar-21 May-21 10 BA 32.41 27.21 Mar-21 May-21 9.5% 7.5%#11June 2021 Source NBU Accumulated international reserves Comments Gross international reserves grew by 9.7% (y-o-y) and reached US$ 27.8bn as of June 1, 2021 (covering 4.2 months of future imports) Maintained high levels of FX reserves and floating FX rate policy are the most influential factors providing strong buffer for Ukraine on the back of the current crisis (vs previous ones) Over May 2021, the international reserves decreased on the back of new FX domestic placements (US$ 354.3m), government transactions to repay public debt (US$ 650.6m), and financial instruments revaluation gain (US$ 136.8m). The interbank FX market was balanced in May, meaning the NBU did not have to make FX interventions. Gross international reserves by instrument (Jun 1, 2021) Gross and net international reserves (eop), US$ bn GN NW Months of imports 35 30 3.4x 4.0x 4.8x 4.2x 29.0 29.1 27.8 27.0 26.1 25 22.0 20.8 19.4 20 15 10 15 Jan-19 Feb-19 Mar-19 Gross international reserves by currency (Jun 1, 2021) 202% 6% 11% ■Securities (rating A) ■ USD 19% 6% Securities (rating AA) ■ EUR 8% ■ GBP US$ 27.8bn Jun 1, 2021 8% ■Securities (rating AAA) US$ 27.8bn Jun 1, 2021 ■ JPY ■ CNY 56% ■ Monetary gold Banknotes, current accounts, time deposits 80% ■ Gold ■ Other Mar-21 Apr-21 May-21 BA 11#12June 2021 1 Solid foundation for long-term economic growth 2 Return to gradual fiscal consolidation 3 Prudent debt management strategy 4 5 Reviving business climate and development prospects Strong focus on ESG considerations 12#13On May 31, the Government Key indicators of 2022-2024 Budget Declaration 2022-2024 Budget Declaration 2020 (Act.) 2021 (Law) 2022 (Plan) 2023 (Plan) 2024 (Plan) approved the Budget Key macroeconomic assumptions Declaration for 2022 - - 2024 for the first time, and on June 2 it was submitted to the Parliament of Ukraine for consideration The Budget Declaration for 2022- 2024 is the Government's vision of the budget policy for the medium term. The document defines the main budget indicators and the goals of the state policy with the key performance indicators Nominal GDP, UAHbn Real GDP growth, % CPI (eop), % PPI (eop), % Unemployment rate, % (ii) Expenditures as % of GDP Trade deficit, USDbn NBU's key policy rate (eop), % UAH/USD (avg) 4,192 4,809 5,369 5,994 6,651 (4.0%) 4.1% 3.8% 4.7% 5.0% 5.0% 8.9% 6.2% 5.3% 5.0% 14.5% 17.0% 7.8% 6.2% 5.7% 9.5% 9.2% 8.5% 8.0% 7.8% (1.8) (6.2) (8.6) (10.6) (12.1) 6.0% 7.5% 7.0% 5.5% 5.2% 27.0 28.0 28.6 28.8 29.2 Key state budget indicators, UAHbn (i) Revenues 1,076.0 1,097.5 1,219.6 1,333.2 1,451.6 as % of GDP 25.7% 22.8% 22.7% 22.2% 21.8% 1,288.1 1,335.2 1,394.2 1,497.0 1,614.1 30.7% 27.8% 26.0% 25.0% 24.3% (iii) Net lending 5.5 9.0 13.5 16.0 17.1 as % of GDP 0.1% 0.2% 0.3% 0.3% 0.3% Overall state budget deficit 217.6 246.6 188.0 179.8 179.6 as % of GDP 5.2% 5.1% 3.5% 3.0% 2.7% Source Ministry of Finance of Ukraine June 2021 13#142021 state budget to resume gradual fiscal consolidation FY 2020 (Act.) FY 2021 (Plan) Key indicators of 2021 State budget: Total revenues: UAH 1,098bn (+2%) Total expenditures: UAH 1,335bn (+4%) Budget deficit²: 2021 vs 2020 state budget revenues split¹ ■VAT 2021 vs 2020 state budget expenditures split¹ 2021 state budget revenues: UAH 1,098bn 2021 state budget expenditures: UAH 1,335bn 13% FY 2020 (Act.) FY 2021 (Plan) ■Social welfare 5%2% 5% Security and defense 1% 4% 24% 21% 7% 25% ■Interbudgetary transfers ■Personal income tax UAH 246.6bn / 5.1% of GDP in 2021 (per government's forecast 13% 37% UAH 1,076 bn UAH 1,288 bn 20% 44% ■Corporate income tax 12% 10% of UAH 4,809bn GDP in 2021) UAH 1,098 bn UAH 1,335 bn 21% Other tax revenues 9% 22% 21% 11% 10% 10% 12% 13% ■Non-tax revenues Debt service Health Economic activity Education Public administration 13% 12% Notes 1 According to State Budget Law 2021 (as of May 2021) and Actual Annual State Budget Execution 2020 2021 State Budget Law: general fund financing, UAHbn 12.7 3.4 98.9 369.5 Other 7.6 0.7 24.4 17.8 6.2 0.4 USDbn³ 220.9 20.0 709.3 517.3 245.8 raised4 180.0 2 Budget deficit defined as 12.0 revenues minus expenditures and minus net lending 3 Translated at the 2021 budgeted avg 29.1 UAH per 1 USD Domestic debt repayment External debt repayment 4 As of June 29, 2021 State budget general fund deficit Other5 Gross general fund financing needs Domestic debt issuance 36.9 raised4 External debt issuance Privatization proceeds June 2021 14#15June 2021 Jan-May 2021 state budget execution UAH m Revenues Tax revenues, incl. Personal income tax and income charge Corporate profit tax Fee for the use of mineral resources Excises VAT (net of VAT reimbursement) Jan-May 2020 Jan-May 2021 % diff. 314,847 476,169 +51% 239,570 402,576 +68% 36,625 51,310 +40% 35,451 62,464 +76% 9,264 20,729 +124% 36,836 57,420 +56% 111,889 194,495 +74% Export and Import duties 8,485 14,178 +67% Non-tax revenues 75,277 73,593 (2%) Expenditures (340,116) (509,428) +50% General public functions, incl.: (53,039) (82,317) +55% Debt service (41,078) (65,534) +60% Security and Defense (70,889) (102,724) +45% Economic activity (16,456) (33,397) +103% Protection of environment (1,083) (1,527) +41% Healthcare (14,948) (62,267) +317% Intellectual and physical development (2,098) (3,969) +89% Education (15,549) (23,076) +48% Social welfare (113,055) (143,567) +27% Interbudgetary transfers (52,993) (56,579) +7% Net lending 961 (452) (147%) Primary state budget balance 16,770 31,823 +90% Overall state budget balance (24,308) (33,711) +39% 15#16June 2021 1 Solid foundation for long-term economic growth 2 Return to gradual fiscal consolidation 3 Prudent debt management strategy 4 5 Reviving business climate and development prospects Strong focus on ESG considerations BA 16#17Prudent and proactive debt management strategy State and state-guaranteed debt structure (end-May 2021) State and state-guaranteed debt by currency, US$ bn • debt, 41% of As of end-May 2021, Ukraine's total state and state-guaranteed debt (US$ 91.5bn / UAH 2,517bn) split between: 59% of external (In US$ bn) Total (% of GDP) State debt State-guaranteed debt 79.1% 80.9% 71.8% 60.9% 50.3% 60.8% Domestic in FX Domestic bonds 65.5 71.0 76.3 78.3 84.4 90.3 91.5 6% Domestic IFIs 21% 6% 4.4 0.6 6% 6% 8% 9% 10% 14% 13% in UAH 39% 17.3 Bank 19% 18% 18% 17% 13% US$ 81.5bn Other external 1.9 14% 14% loans US$ 19% 3.3 debt domestic debt 10.0bn 44% 45% 39% 43% 44% 36% 36% 31.9 4% 89% of state debt, 11% of state- guaranteed debt Notes 1 24.6 7.5 IFIs Eurobonds 30% 75% 30% 30% 30% 29% 37% 35% 36% 2015 2016 2017 2018 2019 2020 May 2021 ■UAH USD XDR EUR CAD JPY State debt amortization schedule (01.06.2021)1, US$ bn State debt dynamics, US$ bn Total debt service 21.1 3.7 1.9 79.9 81.5 74.4 11.5 10.1 10.5 8.4 6.7 67.1% 69.2% 65.3 67.2 60.7 61.5% 36.3 55.6 26.8 52.3% 27.5 53.9% 24.7 35.0 44.3% 21.2 2.5 12.2 1.8 3.6 5.7 44.5 45.2 3.6 1.7 34.4 36.0 38.5 39.7 39.3 4.7 3.8 1.5 1.3 2.9 1.7 2.3 3.3 2.4 1.9 1.6 1.4 2021E 2022E 2023E 2024E 2025E ■Interest - Domestic debt ■Interest - External debt Principal - Domestic debt Principal - External debt 2026E 2015 2016 2017 2018 2019 2020 May 2021 State external debt State domestic debt as % of GDP Incl. outstanding debt obligations only Source Ministry of Finance June 2021 BA 17#18Switching focus to UAH-denominated issuances on domestic market • UAH-denominated issuances grew at Domestic government bonds placements by currency Funds remitted to State Budget UAHbn 98% CAGR over 2017-2020 After major 3.4x 2019 y-o-y volume increase, 2020 saw further growth of 13% y-o-y in UAH- US$bn denominated securities YTD 2021 kept the positive growth tendency with a major increase of 62% y-o-y for UAH- EURbn denominated issuances In line with MTDS objectives, FX- denominated issuances are kept relatively stable 65.1 32.8 UAH-denominated issuances 258.8 227.6 4.3 3.9 3.5 1.8 158.1 US$-denominated issuances 1.7 EUR-denominated issuances 0.8 0.5 0.4 0.4 0.1 2017 2018 Share of UAH-denominated debt in total state debt 34.4% 33.4% 1 2019 2020 YTD 2021 41.0% 38.2% 38.9% Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Apr 30, 2021 Notes Source Ministry of Finance 1 As of June 29, 2021 June 2021 BA 18#19Ukraine's domestic government bond holders On August 28, the NBU has eliminated obstacles for foreign investors to enter the Ukrainian securities market through establishment of the direct access to the purchase and sale of government bonds with the help of a "nominee holder" From now on Ukrainian banks that have accounts with the NBU depository will be able to open depot accounts for its foreign clients for the purpose Key highlights With a c.50% share, banks are currently the largest holder of domestic government bonds followed by the NBU, which accounts for c.32% of the portfolio¹ At c.11% of total outstanding Ukrainian domestic government bonds as of June 20211, the portfolio held by non- residents has recently returned on its upward trajectory (after Mar-Nov 2020 decline in line with the EM's capital outflow) Ukraine is making consistent steps to deepen domestic government bond market and to increase share of non- residents in local currency bonds portfolio A link between Clearstream, the international central securities depository, and the depository of the NBU active since May 2019 ensuring streamlined access to Ukraine's domestic government bond market Domestic government bonds held by non-residents (eop) Domestic government bond holders¹ 11% 32% 2% 5% ■ Banks ■NBU 50% ■Non-residents ■Companies ■Individuals Nominal and real weighted avg yields at primary auctions, % 2.1 3.5 4.1 5.0 5.2 4.2 3.8 3.2 2.8 3.0 3.7 3.5 4.0 19.0%18.6% 16.7% In USDbn 26.4% 15.1% 24.0% 10.0% 21.2% 21.8% of buying and selling 11.2% 11.3% 11.1% 11.7% 18.7% 18.1% Ukrainian government bonds 15.8% 16.3% 14.2% 12.7% 12.4% 13.4% 0.9% 11.4% 10.2% 14.0% 12.7% 8.9% 8.5% 14.6% 14.3% 10.0% 9.7% 16.2% 1.0% 10.7% 10.6% 9.0% 8.9% 7.5% 7.2% 7.1% 8.1% 8.2% 6.4% 6.6% 7.2% 5.7% 4.1% 5.9% 4.3% 2.1% 6.5% 6.2% 6.3 6.5% 2.3% 4.8% 4.5% 4.8% 56 87 102 118 129 112 101 88 79 85 103 97 111 Notes 1 2 As of June 29, 2021 According to NBU's survey about inflation 19 expectations of financial analysts for the next 12 months Source Ministry of Finance, NBU Held by non-residents, UAHbn % of total portfolio (excl. NBU) Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun 19 19 19 20 20 20 20 20 20 21 21 21 % of total portfolio ទីន Jan Apr 19 19 Jul Oct Jan Apr Jul Oct Jan 19 19 20 20 20 20 21 Apr 21 Jun1 21 Nominal weighted avg yield, % Real weighted avg yield, % 2 CPI expectations for next 12 months (y-o-y), % Source Ministry of Finance of Ukraine, NBU June 2021 BA 19#20Pipeline of official concessional external financing Pipeline financing Combined with a proactive response to Covid-19 economic fallout, Ukraine managed to secure a range of concessional financing from its international partners to cover significant portion of external financing needs for 2020-2021 Partner International Monetary Fund IN ERNATION MONE ONETARY FUND European Union European Investment Bank Programs On June 9th 2020, IMF Executive Board approved 18-month Stand-By Arrangement (SBA) for Ukraine, under which US$ 2.1bn (SDR 1.5bn) was disbursed immediately The total amount of program is US$ 5.1bn (SDR 3.6bn) that will be directed towards support of balance of payments and budget to help address the effects of Covid-19 while moving forward important structural reforms EUR 1.2bn MFA program for Ukraine was adopted within EUR 3.0bn support package to neighboring partners in May 2020. The first EUR 623.5m tranche has been provided on December 9, 2020. The second tranche of EUR 600m is conditional upon reforms in such areas as public finance management, good governance and the rule of law Since 2014, the EU has approved EUR 5.0bn in MFA support for Ukraine, o/w EUR 3.3bn were disbursed during 2014-2018, EUR 1.1bn in 2020, and EUR 0.6bn are expected in 2021 In addition, various European institutions provide significant financial support for Ukraine, e.g. EUR 340m from the EIB within "Early Recovery Programme" US$ 3.0bn¹ EUR 0.6bn Notes 1 World Bank WORLD BANK GROUP On June 25, 2021, the World Bank and the government have signed US$ 350m agreement aimed at economic development during COVID-19, social support to vulnerable groups and strengthening of state institutions On May 6, 2021, the World Bank approved a US$ 200m project to support efficiency, quality, and transparency of higher education system in Ukraine On December 11, 2020 the institution has approved US$ 300m loan to the state budget general fund within the Second Additional Financing for COVID-19 Response under the Social Safety Nets Modernization Project US$ 0.55bn Translated from SDR to US$ based on 1.4424 US$ per 1 SDR IMF exchange rate as of June 25, 2021 Total amount of envisaged external financing from the official partners June 2021 c.US$ 4.3bn 20 20#21June 2021 BB- B+ B B- CCC+ CCC CCC- CC RD Mar-08 Sep-08 Mar-09 Sep-09 Fitch Ratings Rating: B, Stable B / Stable credit rating affirmed by both Fitch and S&P Last update: Feb 26, 2021, reaffirmed at B, outlook Stable Key rating drivers of the last review: BB Track record of multilateral support and a credible macroeconomic policy framework that has underpinned a relatively high degree of resilience to the coronavirus shock Expectations for gradual fiscal consolidation and continuation of macroeconomic policies Human development indicators compare favorably with the peer group, a net external creditor position of close to 13% of GDP, and general government debt is somewhat lower than the 'B' median S&P Global Rating: B, Stable Last update: Mar 12, 2021, reaffirmed at B, outlook stable Key rating drivers of the last review: BB BB- Ukraine's growth, balance of payments, and public finances all outperformed the expectations in 2020 Reserve adequacy has improved, providing a cushion against potential adverse external developments including further delays in the disbursement of concessional loans Stronger macroeconomic management since 2015 and augmented foreign exchange (FX) reserves The ongoing implementation of reforms helps the government access commercial debt markets and receive concessional funding from international financial institutions (IFIs) Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 B+ B B B- CCC+ CCC CCC- CC SD Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 21 24 m#22June 2021 1 Solid foundation for long-term economic growth 2 Return to gradual fiscal consolidation 3 Prudent debt management strategy Reviving business climate and development prospects 4 5 Strong focus on ESG considerations 222 22#23Business climate improvement to accelerate growth potential June 2021 Ease of Doing Business ranking +88 p. Ukraine's selected pillars in 2020 global ranking Dealing with 20 construction permits 61 Starting a business (+10 p. vs the 64 71 (-5 p. vs the previous report) 76 previous report) 83 80 87 37 Getting credit 61 Registering property 112 (-5 p. vs the previous report) 137 152 Protecting minority 45 investors (+27 p. vs the 2012 2013 2014 2015 2016 2017 2018 2019 2020 previous report) (+2 p. vs the previous report) 63 Enforcing contracts (+6 p. vs the previous report) Source Doing Business Business expectations index by the NBU 121% 120% 117% 117% 115% 113% 111% 109% Q1 2021 expectations by industry Mining 113.3% 108% 101% 100% Manufacturing 112.3% 3333 םחם Retail 110.1% 91% 100% 98% >100% positive expectations - The index has dropped below 100% for the first time since Q1 2016 amid expectations on Covid-19 consequences but has quickly recovered back in Q3 2020 Q1 Q2' Q3' Q4' Q1' Q2' Q3' Q4' Q1' Q2' Q3' Q4' Q1' Q2' Q3' Q4' Q1' Q2' Q3' Q4' Q1' '16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20 20 21 Source NBU Transport & logistics 104.4% Utilities 101.1% BA 23 23#24Seizing crisis opportunity for agri exports Overall Ukraine concluded 19 FTAs with 46 countries 2001 FTA with Macedonia 2008 Ukraine entered WTO FTA with EFTA 2012 countries FTA with Montenegro Comments Reinforced by Covid-19, the global demand for basic goods, such as agri and food, remains stable This provides Ukraine an opportunity to elevate basic goods exports to large and developed economies amidst crisis Most of such trade connections have already been set up and developed with conclusion of an increasing number of FTAs while Ukraine has undergone a major shift in trade flows towards the EU market in recent years The EU's share in Ukraine's foreign trade turnover (goods) went up from 35% in 2015 to 38% in 2020 DCFTA (in full force since September 2017) provides further opportunities in the EU markets Ukraine's exports and imports breakdown¹ in 4m 2021 " Exports 404% 7% 15% 24% Imports 5% 2% 41% 8% 6% 1% 12% 4m 2021 y-o-y increase in export of goods by countries² Agricultural products ■Mineral products Timber and wood products ■Industrial goods Source National Bank of Ukraine ■ Ferrrous and nonferrous metals Machinery and equipment ■ Chemicals ■ Other (incl. informal trade) Ukraine's export prices on selected agri goods (US$/t) 2013 FTA with CIS countries 300 Czech Rep. / +84.1% USD 431m China +57.3% Ukraine Corn Price USD 2,789m 270 FOB Black Sea Ports 240 DCFTA with the EU Germany / +50.4% USD 842m 210 USA / +42.9% USD 420m 180 2017 150 FTA with Canada C⭑ Turkey / +41.3% USD 1,211m Ukraine Sunflower Poland +40.3% 1,800 USD 1,460m Oil Export Price 1,500 FTA with 1,200 2020 Israel, United Romania / +33.9% USD 465m India / +30.6% USD 713m 900 600 Kingdom Source State Statistics Service of Ukraine Jun-20 Aug-20 Notes 1 2 Export and import of goods breakdown Only countries, exports of goods to which in 4m 2021 surpassed 2.0% of total Ukraine's export of goods were included June 2021 284 Relatively strong and reviving prices for Ukraine's main exports Oct-20 Dec-20 Feb-21 Apr-21 Source Bloomberg, as of June 24, 2021 1,115 24 24#25June 2021 1 Solid foundation for long-term economic growth 2 Return to gradual fiscal consolidation 3 Prudent debt management strategy 4 5 Reviving business climate and development prospects Strong focus on ESG considerations BA 25 25#26Electricity production from RES, TWh ESG: environmental RES installed capacity dynamics as of eop, MW 8,516 ■SPPs WPPS 6,943 117 1,314 mini-HPPS 10.9 114 ■Biomass and Biogas 1,170 Share or RES in total power output, % 0.9% 1.0% 1.2% 1.7% 3.6% 7.3% 5.5 6,873 2,274 5,478 99 2.6 1.5 1.6 1.9 1,426 999 1,135 533 95 87 90 465 426 438 1,545 434 548 793 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Key environmental initiatives / commitments Sources SAEE, Ministry of Energy of Ukraine 2014: Ukraine committed to Environmental standard aligned on EU standards as part of the EU-Ukraine Association Agreement 2015: Ukraine committed itself to achieving a range of policy targets attached to the UN Sustainable Development Goals (SDGs) 2016: Ukraine signed the Paris agreement in April (which commits Ukraine to ensuring that greenhouse gas emissions in 2030 will not exceed 60% of the 1990 emissions level) and ratified it in September 2017: the government adopted the Energy Strategy of Ukraine until 2035. It outlines measures to: (i) reduce greenhouse gas emissions, and (ii) restructure the coal sector to reduce its environmental impact June 2020: Government signs Memorandum with green energy producers August 2020: IFC Partnered with Ukraine's National Securities and Stock Market Commission to Boost Green Finance. The SAEE¹ developed a draft Concept for the implementation of a green bond market in Ukraine June 2021 BA 26 26#27ESG: social Ukraine belongs to High Human Development group within UNDP HDI (which is also used by selected credit rating agencies) and demonstrates consistent improvement since 2015 While life expectancy and education indices perform relatively in line with the regional peers and generally overperform rating peers, the income measure, GNI per capita, is the one pulling the country's ranking down Sources UNDP, Ministry of Education and Science of Ukraine, Ministry of Health of Ukraine Ranking position (out of 189) UNPD Human Development Index 2020 Life expectancy, years Exp. years of schooling GNI per capita, USDK UKR 72 UKR 15 UKR 13 Regional peers Rating peers UKR POL HUN 74 32 POL 79 POL 16 35 POL HUN 77 HUN 15 HUN 31 40 40 49 ROU 49 BGR HRV EGY NGA 161 GHA TUR 138 116 ROU 76 ROU 14 ROU BGR 75 BGR 14 56 BGR 23 43 HRV 79 HRV 15 HRV EGY 13 EGY 11 72 EGY NGA 10 NGA 5 GHA 12 GHA 64 NGA 55 54 TUR TUR 78 GHA 5 17 TUR 29 28 28 In order to further enhance the country's human capital, both education and healthcare sectors are currently undergoing reforms with the following key priorities: • Education: (i) affordable and quality pre-school education, (ii) New Ukrainian School, (iii) modern professional (vocational) education, (iv) quality higher education and development of adult education, (v) development of science and innovation Healthcare: (i) implementation of the new financing mechanism "money follows the patient", (ii) introduction of "family" doctors, (iii) primary care, palliative care, and emergency medical care 100% funded by the state, (iv) new methods for procuring and distributing vaccines, (v) new licensing and educational standards for doctors, etc. June 2021 27 27#28Ukraine vs peers in governance ratings Sustainable Development Goals Index 2021 Rating: 0 (worst) to 100 (best) 80 79 76 75 74 80 80 69 49 49 ESG: governance WGI and other developments on governance Worldwide 70 Governance 70 Government Effectiveness 63 Indicators 2019 Higher better 60 Lower worse performance within UKR POL HUN ROU BGR HRV EGY NGA GHA TUR Analyzes country's 17 goals Open Budget Budget International Partnership Index 2019 63 63 60 60 71 68 64 45 43 21 54 51 Rating: 0 (worst) to 100 (best) Analyzes country's budget transparency UKR POL HUN ROU BGR HRV EGY NGA GHA TUR Investor Relations IIF INSTITUTE OF 40 INTERNATIONAL FINANCE 40 Index 2020 Rating: 0 (worst) to 42 (best) Analyzes country's investor relations function UKR Sources U.S. Department of State, World Bank, UN, TPPR, International Budget Partnership, IIF June 2021 Voice and Accountability Egypt Nigeria 20 - Turkey ⚫ Ukraine Rule of Law Regulatory Quality 37 36 37 27 26 25 16 20 20 42 POL HUN ROU BGR HRV EGY NGA GHA TUR Regional peers Rating peers Worldwide Governance Indicators (WGI) are published by the World Bank and constitute an important basis for sovereign credit ratings Ukraine performs in line with its rating peers demonstrating relatively solid performance in Voice and Accountability, Government Effectiveness and Regulatory Quality pillars Besides the mentioned indices, Ukraine has also topped Transparent Public Procurement Rating in 2019 (among 31 countries) and was highly appraised with regard to the fiscal transparency in the U.S. 2020 Fiscal Transparency Report 28#29June 2021 非 MINISTRY OF FINANCE OF UKRAINE BA 29