#1Ukraine: Investor Presentation July 2020 00000 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. Such forward-looking statements are based on numerous assumptions regarding Ukraine's present and future strategies and the environment in which it will operate in the future. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the Information or the opinions contained therein. The Information, including but not limited to forward-looking statements, applies only as of the date of this document and is not intended to give any assurances as to future results. The Ministry of Finance expressly disclaims any obligation or undertaking to disseminate any updates or revisions to the Information, including any fiscal data or forward-looking statements, and will not publicly release any revisions it may make to the Information that may result from any change in expectations, any change in events, conditions or circumstances on which these forward-looking statements are based, or other events or circumstances arising after the date of this document. July 2020 2#3July 2020 1 The Covid-19 crisis will have a significant but short-term effect 2 Ukraine's financing will benefit from substantial support from partners 3 4 A proactive response should mitigate the impact on the economy An improved business climate and opportunities for growth 5 Appendices A. Solid foundation for long-term economic growth YTD 2020 State and Consolidated Budget execution Prudent debt management strategy B₁ C. D. Proactive reforms across wide range of pillars 3#4$ Real GDP growth Ukraine's economy: dynamics of selected indicators 2015 (9.8)% Consumer inflation (eop) 43.3% Reserves (eop) Primary state budget balance1 State debt % to GDP US$ 13.3bn 2.0% of GDP 67.1% (2015) Note 1 Primary state budget balance defined as state budget revenues minus expenditures excl. debt service and minus net lending Note 2 According to the NBU inflation forecast report as of January 2020 Note 3 According to the NBU inflation forecast report as of April 2020 Note 4 According to Medium-Term Debt Strategy 2019-2022 Sources State Statistics Service of Ukraine, NBU, State Treasury July 2020 I I I Today I 3.2% (2019) 2.4% (Jun-20) US$ 28.5bn (Jul 1, 2020) I I I 1.0% of GDP (2019) 44.3% (2019) I 4#5Marked impact of Covid-19 on external trade in 5m 2020 Export and import of goods and services dynamics, US$m Y-o-y change in export, % 2% (19%) (0.2%) (1%) (15%) 2% (4%) (49%) (7%) 9 065 8 885 ■5m 2019 ■5m 2020 6 6826 227 Comments Based on preliminary estimates, global Covid-19 pandemic and subsequent lockdown had a pronounced impact on Ukraine's external trade in 5m 2020 with export of goods and services falling slightly by 6.3% while import of goods and services declining more rapidly by 18.5% y-o-y in 5m 2020 The total export of goods in 5m 2020 (i.e. US$ 18.0bn) has fallen by 6.1% vs 5m 2019, while export of services has decreased by 6.8% y-o-y The total import of goods in 5m 2020 (i.e. US$ 19.5bn) has fallen by 16.5% vs 5m 2019, while import of services has decreased by 26.2% y-o-y With increased net exports in 4m 2020 such foreign trade dynamics had a positive impact on Ukraine current account Geographic structure of goods trade in 5m 2019 & 5m 20201 Export 4 604 3 713 1 8711 868 13181 306789 671 787 799, 284273 674344 Food and Ferr. and Mineral Machinery Timber Chemicals Industrial agri non-ferr. products and and wood goods products metals equipment products Other Services 509 439 1 071 811 1 107 1 627 3 371 4 215 4 431 4 848 4 709 5 942 6 004 6 942 1 094 1 385 5m 2019 2 294 5m 2020 15% 2 551 ■ EU countries 16% 8% 37% Asian countries US$ 42.6bn 38% 9% in 5m 2019 ■ Russia 7% Share of trade with 10% US$ 37.6bn Asia is growing while substituting in 5m 2020 ■ Other CIS contracted trade with 27% Other Russia and the CIS 32% Source NBU Notes 1 July 2020 Sum of export and import of goods 11% (21%) (30%) (14%) (14%) (10%) 3% (50%) (26%) Import Source NBU Y-o-y change in import, % BA 5#6Firm external position leading to less vulnerability to external shocks July 2020 Comments The trade balance deficit amounted US$ 12.6bn in 2019 largely supported by large machinery and equipment, chemicals, food and agri imports while in 5m 2020 the trade balance surplus reached and US$ 0.3bn due to decreased import coupled with relatively stable export The current account (CA) balance demonstrated surplus in 5m 2020, resulting from a stable goods export coupled with decline in imports due to global energy prices decline 2020 CA deficit is expected to reach 1.7% of GDP (per NBU) as imports will decline more than exports Negative trade balance was largely offset by personal money remittances together with capital account inflows which resulted into positive overall BoP of c.US$ 6.0bn in 2019 and c.US$ 0.2bn in 5m 2020 Private money remittances & travel services trade deficit, US$ bn Balance of payments components, US$ bn BoP, 1.3 2.6 2.9 6.0 (0.5) 0.2 US$ bn 10.2 9.3 6.1 5.6 3.1 (1.9) (3.5) 2016 (6.5) 2017 2018 ■Current account balance (1.1) (4.2) 2019 0.7 (5.4) 5m 2019 5m 2020 ■Financial account balance Ukraine's current and trade balance dynamics, US$ bn 23% CA as % of GDP (2.0)% (3.1)% (4.9)% (2.7)% 20% 7% 8% 59.2 63.5 7% 53.9 46.0 11.1 9.3 11.9 25.9 24.3 6.5 7.0 7.5 (6.9%) (7.8%) 3.4 4.0 (8.7%) 4.9 5.9 6.5 6.9 (8.2%) (29.4) (24.0) (24%) (52.5) (62.7) (70.6) (76.0) 2014 2015 2016 2017 2018 2019 2016 2017 2018 2019 5m 2019 5m 2020 Travel services trade deficit, US$ bn Personal money remittances, US$ bn Remittances y-o-y growth, % Export of goods and services Import of goods and services Trade balance (% of GDP) Source NBU BA 6#7July 2020 Prudent monetary policy implemented by independent regulator Medium-term consumer inflation target range: 5%+/-1% Y-o-y inflation as of June 2020: 2.4% Comments The NBU is significantly softening its monetary policy maintaining the cycle of key policy rate cuts on the back of UAH appreciation and decelerated inflation On June 11, the Board of the NBU decided to cut its key policy rate from 8.0% to 6.0%, its neutral level, indicating the end of the cycle of rapid monetary policy easing. Overall, the key policy rate was reduced by 7.5 p.p. since the beginning of 2020, reaching the historic low over Ukraine's independence Due to relatively tight monetary conditions and UAH revaluation, the NBU brought inflation to its medium-term target (5% +/-1%) in 2019 vs. end-2020 planned initially 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% CPI expectations for the following 12 months 16% 14% 12% 10% 8% 6% 4% 2% 0% Apr-18 Source NBU Banks Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Businesses Aug-19 Households Oct-19 Dec-19 Feb-20 7.0% 7.3% 28 5.9% 5.8% 32 222222 26 24 Apr-20 Jun-20 Financial analysts 1 Feb-18 Consumer price index (CPI) change and key policy rate Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Key policy rate, % - CPI, y-o-y, % UAH/US$ and UAH/EUR exchange rates dynamics 38 Notes Apr-18 As of June 24, 2020 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 EUR Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 7 Apr-20 Jun-20 30.11 26.61 BA 6.0% 2.4%#8July 2020 Source NBU Sufficiently accumulated international reserves Months of Comments Gross international reserves grew by 38.2% (y-o-y) and reached US$ 28.5bn as of July 1, 2020 (covering 4.8 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 June 2020, the international reserves increased by 12.4% (m-o-m) mainly as a result of international funding disbursements (USD 2,076m from the IMF and EUR 500m from the EU), new FX placements (US$ 353m), government transaction to repay public debt (US$ 1,192m), NBU's net FX purchases (US$ 1,155m), and financial instruments revaluation gain (US$ 154m) 30 30 25 25 15 10 10 5 Gross international reserves by instrument Jan-18 imports Gross and net international reserves (eop), US$ bn 2.9x 3.3x 3.5x 28.5 27.0 20.8 21.4 18.8 20 17.7 17.5 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Gross international reserves by currency 1.9 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul 1, 2019 Jul 1, 2019 Jul 1, 2020 18% 18% ■Securities (rating A) 5% Jul 1, 2020 3% ■ USD 6% 16% 5% 25% Securities (rating AA) 4% 5% 5% US$ 20.6bn Jul 1, 2019 US$ 20.6bn 7% ■Securities (rating AAA) 12% Jul 1, 2019 18% ■ EUR ■GBP ■ JPY US$ 28.5bn 10% ■Monetary gold US$ 28.5bn Jul 1, 2020 44% Banknotes, current accounts, time deposits 52% Jul 1, 2020 67% ■ CNY ■ Gold 72% ■ Other 8 4.8x#9July 2020 Maintained NBU's independence National Bank of Ukraine Timeline of the recent events related to the change of the NBU's Governor July 1, 2020 July 3, 2020 July 3-16, 2020 July 15, 2020 July 16, 2020 Mr. Yakiv Smoliy resigned as the Governor of the NBU. Mr. Smoliy was appointed as the Governor of the NBU in March 2018 The Parliament approved the resolution to dismiss Mr. Smoliy as the Governor of the NBU and Mr. Smoliy's resignation formally took effect The First Deputy Governor of the NBU Ms. Kateryna Rozhkova performed duties of the Governor The President nominated Mr. Kyrylo Shevchenko as the Governor of the NBU The Parliament supported that nomination appointing Mr. Shevchenko as the Governor of the NBU with effect from 16 July 2020 The independence, operations and policies of the NBU are unaffected by Mr. Smoliy's resignation and Mr. Shevchenko's subsequent appointment Mr. Shevchenko further indicated his support of the NBU's policy of ensuring macroeconomic stability which must contribute to economic growth Mr. Kyrylo Shevchenko NBU Governor - Since Jul 2020: the Governor of the National Bank of Ukraine - - - Oct 2014 Jul 2020: top management positions in state-owned Ukrgasbank, including Chairman of the Board since May 2015 May 2012 - Aug 2014: advisor to the secretariat of the chair of Oschadbank Feb 2012-Apr 2012: Chairman of the Board of SKPD Apr 2011 Dec 2011: Chairman of the Board of Ukrainian Strategic Group Sep 2009-Apr 2010: First Deputy Chairman of the Board at Ukrgasbank May 2009-Sep 2009: advisor to the prime minister of Ukraine Dec 2006 May 2009: Chairman of the State Mortgage Institution 1995-2006: work in Finance and Credit bank, reaching the position of a Deputy Chairman of the Board BA 9#10July 2020 Ukraine's financing will benefit from substantial support from partners 1 The Covid-19 crisis will have a significant but short-term effect 2 3 A proactive response should 4 mitigate the impact on the economy An improved business climate and opportunities for growth 5 Appendices BA 10#11US$ 20.5bn of borrowings are envisaged per revised 2020 budget During YTD 2020, the following financing sources have been tapped: EUR 1.25bn 2030 Eurobond issuance 0 UAH 157bn (equiv. of US$ 6.0bn) raised on domestic market o/w UAH 94.9bn in UAH-denominated bonds and Ukraine's revised 2020 gross financing needs Ukraine's 2020 Gross financing needs split by funding sources, UAH bn Initial 2020 Budget¹ Domestic debt service External debt service (250.7) (172.9) Other³ 1.2 Primary balance 45.2 Gross financing needs (377.2) US$ 2.3bn in FX Retained cash position 4.7 denominated domestic bonds US$ 150m was approved by the WB to support Ukraine Social Safety Net System to combat Covid-19 consequences and Domestic and external financing Privatization proceeds 12.0 on May 28, 2020, Notes US$ 50m was already disbursed 1 Figures based on 2020 state budget law as of February 2020 2 Figures based on 2020 revised state budget law as of April 2020 3 July 2020 360.5 April 2020 Revised Budget² (307.1) 0.5 (183.7) Other includes financing for active operations, i.e. changes in the volume of deposits and securities used to manage liquidity, changes in the volume of budget funds Source Ministry of Finance (129.7) (620.5) 4.7 615.3 BA 11#12Status of cooperation between Ukraine and the IMF New 18-months US$ 5.0bn SBA program On May 21, 2020, a Staff Level Agreement on a new 18-month SDR 3.6bn (c. US$ 5.0bn) arrangement under the Stand-By Arrangement (SBA) was agreed and approved by the Executive Board on June 9. It replaced the Staff Level Agreement on a 3-year Extended Fund Facility (EFF) program which was achieved in December 2019 and the Executive Board approval that was made afterwards According to the IMF, the decision to shift was made given “the unprecedent uncertainty surrounding the economic and financial outlook and the need to focus policy priorities on near term containment and stabilization" The SBA program will enable Ukraine to effectively manage the economic and health impact of Covid-19 providing balance of payment and budget support within a policy framework "When recovery is in place, the focus could shift back to addressing Ukraine's longer term structural reform needs to foster stronger and more inclusive growth" Past EFF and SBA programs December 1, 2020 May 15, 2021 October 15, 2021 Availability date / Reviews SDR m US$ m¹ SBA 2020 program (US$ 5.0bn, 179% of quota) June 9, 2020 1,500 2,076 September 1, 2020 500 691 500 691 400 553 700 967 Total SBA program 3,600 4,973 SBA 2018 program (US$ 3.9bn, 139% of quota) December 18, 2018 1,000 1,391 Total SBA program 1,000 1,391 EFF 2015 program (US$ 17.5bn, 900% of quota) March 11, 2015 3,546 4,879 July 31, 2015 [1st review] 1,182 1,659 September 15, 2016 [2nd review] 716 1,003 April 3, 2017 [3rd review] 734 996 Total EFF program 6,178 8,537 Typical duration Program design Duration for Ukraine Amount planned to be received by Ukraine over 2020-2021 Sources IMF, Ministry of Finance EFF program 36 months, max 48 months, longer engagement and repayment period Strong focus on structural adjustment 36 months SBA program 12-24 months, max 36 months, shorter engagement and repayment period | Fewer conditions, focus on objectives 18 months US$ 5.0bn US$ 5.0bn Key priorities under new IMF's 2020 SBA program: Mitigating the economic impact of the crisis, including by supporting households and businesses Ensuring continued central bank independence and a flexible exchange rate Safeguarding financial stability while recovering the costs from bank resolutions Moving forward with key governance and anti-corruption measures to preserve and deepen recent gains. Note 1 Past tranches translated at NBU XDR/US$ exchange rate as of the date of their receipt, future tranches (SBA 2020 program) translated per the IMF's rate of 0.7238 SDR/USD as of June 23, 2020 July 2020 12#13Official concessional external financing envisaged for 2020 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 The total amount from our official partners is expected to reach c.US$ 6.2bn in 2020 Both the IMF's SBA and the EU's MFA financing constitute significant portions (i.e. c.57% and c.31%, respectively) of total 2020 envisaged external financing from the official partners Partner International Monetary Fund ZNI ERNATION MONE ONETA TARY FUND FUN European Union European Investment Bank World Bank WORLD BANK GROUP Programs On June 9, IMF Executive Board approved 18-month Stand-By Arrangement (SBA) for Ukraine, under which USD 2.1bn was disbursed immediately The total amount of program is US$ 5.0bn (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 Within the new SBA program, US$ 3.5bn is expected to be received during 2020 EUR 0.5bn second tranche out of EUR 1.0bn macro financial assistance program, MFA IV, was received in June 2020 On May 18, a new EUR 1.2bn MFA program for Ukraine was adopted within EUR 3.0bn support package to neighboring partners, o/w EUR 600m to be provided immediately and unconditionally, while the second tranche will depend on conditions that will be negotiated in due course Since 2014, the EU has approved EUR 5.0bn in MFA support for Ukraine, o/w EUR 3.3bn were disbursed during 2014-2018 and EUR 1.7bn are expected in 2020 In addition, other European institutions provide financial support for Ukraine to fight Covid-19 consequences, e.g. EUR 40m from the EIB 2020 financing US$ 3.5bn EUR 0.5bn EUR 1.2bn On June 26, the World Bank has approved US$ 350m First Economic Recovery Development Policy Loan (DPL) for Ukraine to support economic recovery and mitigate Covid-19 effects. It is expected that another US$ 350m of budget financing loans from the World Bank will be finalized and disbursed also in 2020 On May 5, the US$ 150m Loan Agreement (Additional Financing for the Social Safety Nets Modernization Project) between Ukraine and IBRD was signed. On May 28, 2020, US$ 50.4m were already disbursed US$ 0.7bn US$ 50.4m July 2020 Total 2020 envisaged external financing from the official partners c. US$ 6.2bn BA 13#14July 2020 1 The Covid-19 crisis will have a significant but short-term effect 2 3 4 Ukraine's financing will benefit from substantial support from partners A proactive response should mitigate the impact on the economy An improved business climate and opportunities for growth 5 Appendices BA 14#15Extensive governmental response to facilitate Covid-19 impact As a response to economic shock caused by the Covid-19 outbreak, Ukraine introduced a comprehensive stimulus package with policy measures implemented across three main categories: businesses, individuals monetary response Businesses Extension of a number of eligible businesses for 5-7-9% Affordable Loans Program and enhancement of program terms Exemption from import duties and VAT of goods used to combat Covid-19 (medicines, medical devices, equipment, etc.) Cancellation of payment of social security contribution for selected categories of payers and abolishment of penalties for late or incomplete payment or filing Cancelation of penalties for violation of tax legislation for March-May 2020 Local governments are allowed to decide on the single tax rate reduction in 2020 Moratorium on tax audits and inspections for March-May 2020 2 Individuals 300% increase in salaries for medical personnel working with Covid-19 patients One-off pension increase to low-income pensioners and monthly pension top-up for retirees aged 80+ years Deadline for filing income and wealth tax declarations extended until July 1 Moratorium on penalties and disconnection of consumers who are late on utility payments Increase of tax brackets for single tax payers Cancellation of penalties for individuals due to consumer loans overdue for March-April 2020 Launch of UAH 65bn coronavirus response fund within state budget to finance immediate areas to counter the spread of Covid-19 Exemption of non-residential real estate from real estate tax in March 2020 Land rent is not accrued and paid for March 2020 3 Monetary (NBU) Introduced recommendations to banks to deal with borrowers facing financial difficulties as a result of Covid-19 Encouraged banks to refrain from the distribution of dividends Modified calculation of reserve requirements as part of banks' liquidity support Delayed introduction of capital buffers for banks Delayed banks' onsite inspections and stress testing Introduction of long-term refinancing instrument for banks (up to 5 years) Doubled frequency of liquidity tenders Extended deadline for the development and approval of banks' strategies of non- performing assets management Extended deadline for banks to submit their risk tolerance declarations Banks are eligible to apply only one stress test for business recovery plans (the most severe one) rather than 2 tests before Extended deadlines for banks to submit financial accounts for FY 2019 and Q1 2020 July 2020 Sources NBU, CMU, Ukrainelnvest BA 15#16Budget-financed economic stimulus package Benchmarking of peers' Covid-19 budget-financed stimulus packages as % of GDP Governments globally have introduced a comprehensive and ambitious set of policy responses with an aggregate amount of fiscal packages being close to US$ 9.9tn (or 11.4% of global GDP as of end-2019) with about 80 countries adopting budget-financed stimulus of at least 1% of GDP 5.0% 4.4% 3.7% 2.7% 2.1% 1.6% 1.6% 1.5% 1.0% 0.8% 0.8% 0.7% Lithuania Czech Bulgaria Poland Republic Georgia Ukraine Egypt Turkey Slovak Morocco Romania Albania Republic C⭑ + + + + Ukraine's committed fiscal package to Covid-19 economic and social impact is broadly comparable with those of its peers in terms of the response fund size as % of projected 2020 nominal GDP Out of the UAH 65bn of Covid-19 response fund, decisions for disbursement have been made for UAH 27bn (c.42%) on non- refundable basis and UAH 1.3bn (c.2%) on refundable basis, as of June 1, 2020 The financing from the Covid-19 response fund is directed towards: Purchase of goods and services for prevention of Covid- 19 spread, including medical services within the program of state guarantees for medical care of population Increase of salaries of medical and other workers directly fighting with Covid-19 One-time financial assistance to families of medical and other healthcare workers who have died due to Covid-19 Provision of financial assistance to socially vulnerable categories of population, in particular elderly Refundable and non-refundable financial assistance to Social Insurance Fund of Ukraine and Compulsory State Social Insurance Fund of Ukraine for Unemployment Replenishment of the reserve fund of the state budget BA July 2020 Sources IMF, CMU, Ministry of Finance 16#17Loosened 2020 fiscal policy to minimize loss in economic growth 2020 state budget revenues split (2020 State budget Law¹) Revised state budget revenues: UAH 976 bn 2020 state budget expenditures split (2020 State budget Law¹) Revised state budget expenditures: UAH 1,266bn Due to Covid-19, the State budget 2020 was revised in April 2020 in Prior to revision Revised ■ VAT 20% 15% 1% Prior to revision ■Social protection Revised 9% 2% 4% 4% 25% 5% the following manner: • Total revenues: UAH 976bn (-11%) ■Personal income tax 25% 7% 8% UAH 1,096 bn 41% 39% UAH 1,182 bn Corporate income tax 8% 21% Total expenditures: 9% UAH 976 bn UAH 1,266 bn UAH 1,266bn (+7%) 20% Other tax revenues 12% Security and defense ■Interbudgetary transfers ■Debt service Health Economic activity 22% Budget deficit2: ■ Education 11% 12% Non-tax revenues 12% 21% 14% UAH 298bn / 7.5% of GDP in 2020 10% 11% 12% Public administration ■ Other (government forecast) Overall state budget balance³, UAH bn Plan Act. Plan Act. Plan Act. (70) (48) (59) (81) (298) (69) || (64) (62) (55) (58) (45) State budget general fund performance³, UAH bn Plan Overall (274) balance Plan Act. (70)|(69) (1.6%) (2.9%) (1.7%) (2.0%) 702 698 843 834 908 880 855 576 575 Notes 1 According to State Budget Law 2020 amended as of Apr 2020 2 Budget deficit defined as revenues minus expenditures and minus net lending 3 Based on historical data for 2017-2019; based on Budget Law revised as of April 2020 and 2020 GDP forecast of the NBU for 2020 2016 2017 2018 Overall balance, UAHbn (0.2)% (1)% (1)% (3)% (1)% (1)% (2)% (3)% (7.5%) (645) (639) (764) (753) (901) (879) (978) (949) 2019 2020 Source State Treasury of Ukraine, NBU Overall balance to GDP, % 2016 ■Revenue (plan) ■ Expenditures and net lending (plan) Source State Treasury of Ukraine ■Revenue (actual) ■ Expenditures and net lending (actual) 2017 2018 2019 (1 130) 2020 July 2020 17#18July 2020 Ukraine's financing will benefit from substantial support from partners 1 The Covid-19 crisis will have a significant but short-term effect 2 3 A proactive response should 4 mitigate the impact on the economy An improved business climate and opportunities for growth 5 Appendices BA 18#19July 2020 Business climate improvement to accelerate growth potential 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 98% 121% 120% 117% 117% 115% 113% 111% 109% Q1 2020 most optimistic expectations by industry Mining 121.2% ene Retail 114.8% 100% - >100% positive expectations Transport & logistics 113.3% Construction 113.0% 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 Source NBU Processing industries 112.5% BA 19#20Boosted activity of foreign investors over the last year FDI to real sector of Ukraine, US$ bn 43% CAGR 1.0 0.6 1.6 1.4 2.4 2015 2016 2017 2018 2019 Source NBU Ukrainian M&A market development 76 77 61 2.1 49 1.6 42 32 2 0.9 0.9 0.8 1.0 2014 2015 2016 Total value of deals, USDbn 2017 2018 2019 Total number of deals July 2020 Sources Ukrainelnvest, National Investment Council of Ukraine, KPMG Examples of recent deals and investors G grammarly Bakcell A digital writing tool Grammarly earned an official unicorn status by attracting US$ 90m funding Oct 2019 STADA Acquisition of the pharmaceutical business of Biopharma, including its GMP-certified production facilities Dec 2019 UnionPay 银联 vodafone Acquisition of the second-largest telecom provider in Ukraine for US$ 734m Nov 2019 Scatec / Power China EUR 124m solar power project (commissioning scheduled for 2020) Jun 2019 Other important investors RYANAIR CMEC Nestle IKEA Facciona 中粮 ** H&M COFCO 自然之重塑你我 Sumitomo Corporation SUMITOMO ELECTRIC 20 20#21Seizing crisis opportunity for agri exports Overall Ukraine concluded 18 FTAs with 46 countries 2001 FTA with Macedonia 2008 Ukraine entered WTO FTA with EFTA 2012 FTA with Montenegro 2013 FTA with CIS countries countries 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 went up from 35% in 2015 to 40% in 2019 • DCFTA (in full force since September 2017) provides further opportunities in the EU markets Ukraine's exports and imports breakdown¹ in 2019 Imports 10% 20% 2% Exports 2% 2% 9% 4% 5% US$ 44% 8% 50.1bn US$ 60.8bn 22% 20% 9% 1% 17% 5% 2% 18% Q1 2020 y-o-y increase in export of goods by countries² ■Agriculture products ■Machinery and equipment ■Chemical products ■Textiles and shoes Other Source State Statistics Service of Ukraine Nonprecious metals. ■Mineral products Wood and paper products Fuel and energy products Ukraine's export prices on selected agri goods (US$/t) # South Korea / +127.3% USD 213m UK / +12.9% 187 USD 162m Ukraine Corn Price FOB Black Sea Ports 177 DCFTA with the EU 2017 FTA with Canada China / +95.7% USD 1,253m France / +20.3% USD 117m UAE / +19.2% Netherlands / +7.9% 167 USD 517m Bulgaria / +5.2% 157 USD 132m 830 Ukraine Sunflower Turkey / +5.0% 780 Oil Export Price 2019 FTA with Israel USD 144m Romania / +15.1% USD 285m USD 670m 730 Poland / +1.0% USD 826m 680 630 Notes 1 2 Source State Statistics Service of Ukraine Export and import of goods breakdown Only countries, exports of goods to which in Q1 2020 surpassed 1% of total Ukraine's export of goods were included Sep-19 Oct-19 Nov-19 Dec-19 Source Bloomberg, as of May 29, 2020 July 2020 179 Relatively strong and reviving prices for Ukraine's main exports 756 Jan-20 Feb-20 Mar-20 Apr-20 May-20 ERME 21 21#22Strong focus on ESG considerations Fiscal Transparency: According to the U.S. 2020 Fiscal Transparency Report, Ukraine demonstrated significant progress in fiscal transparency by completing its adoption of international accounting standards. During the review period, the government made its budget and information on debt obligations widely and easily accessible to the general public, including online. Budget documents provided a substantially complete picture of the Ukraine in ESG ratings: WGI 2018 percentile rank Voice and Accountability Government Effectiveness 60 40 Higher better Lower worse 20 Regulatory Quality Egypt Nigeria Turkey Ukraine Rule of Law Ukraine in ESG ratings: HDI 2018 ranking position Strong focus on environmental responsibility Ukraine has committed to the Green Energy Transition concept with key 2050 targets including: Increasing renewable energy share in the national energy balance up to 70% by 2050 Decreasing coal energy share and full replacement of coal- fired power plants by 2050 Further reduction of nuclear generation to 20-25% Full integration of the Ukrainian United Energy System into the pan-European ENTSO-E system Environmental Performance Index 2020 ranking 20 20 26 32 35 37 41 60 62 94 99 100 102 JP Morgan ESG Index (JESG): government's planned expenditures and revenue streams. 33 51 59 69 70 88 94 106 109 111 116 121 CZE SVK ROU LTU POL BGR UKR ALB EGY TUR MAR GEO RES installed capacity dynamics as of eop, MW POL ROU TUR ALB GEO UKR MNG MDA UZB ZAF EGY MAR SPPS mini-HPPS WPPS ■Biomass and Biogas 6 379 114 1 170 Ukraine sovereign JESG country score is 38.65 (Band 4, inheriting 40% of EMBIG Div market value), as of end-May, and is trending upward recently toward 40. If JESG score goes above 40, the country will be upgraded to Band 3 (60% of base index market value) Sources U.S. Department of State, World Bank, UNDP, Yale Center for Environmental Law and Policy, Ukraine's National Security and Defence Council, EuroCape, SAEE, NEURC Worldwide Governance Indicators (WGI) from the World Bank and Human Development Index (HDI) from UNDP constitute an important basis for sovereign credit ratings For both WGI and HDI, Ukraine performs in line with its regional and rating peers: • Being in High Human Development group and demonstrating consistent improvement since 2015 Showing relatively solid performance in WGI Voice and Accountability, Government Effectiveness and Regulatory Quality pillars 2 274 99 4 925 1 426 966 999 1 135 533 95 80 87 90 465 426 426 438 1 545 411 434 548 793 2014 2015 2016 2017 2018 2019 July 2020 22 22#23July 2020 Ukraine's financing will benefit from substantial support from partners 1 The Covid-19 crisis will have a significant but short-term effect 2 3 4 A proactive response should mitigate the impact on the economy An improved business climate and opportunities for growth 5 Appendices 23 23#24July 2020 Appendix A Solid foundation for long-term economic growth BA 24 24#25Robust economic growth path (1/3) 2019 GDP in current prices US$ 154bn GDP per capita dynamics, US$ 2016 US$ 2,188 +21% Comments Ukraine's real GDP growth stood at 3.2% (y-o-y) in 2019 compared to 3.4% in 2018 and 2.5% in 2017 According to preliminary results, real GDP contracted by 1.3% in Q1 2020 (y-o-y) on the back of Covid-19 spread In 2019 Ukraine witnessed a 23.6% real growth in construction, 1.1% - in agriculture, while the industrial production remained relatively stable Strong consumer demand remained the key driver of real growth dynamics followed by the accelerated investments Private consumption contribution to real GDP growth accounted for 8.1% in 2019, whereas positive contribution of fixed capital accumulation totaled 2.4% Real GDP growth (y-o-y), % (9.8)% 2015 3.4% 3.2% 2.4% 2.5% 2016 2017 2018 2019 US$ 2,640 2017 +17% Key economic sectors output growth (y-o-y)1, % 50% 2018 US$ 40% 3,093 30% 20% +18% 10% 0% US$ 3,659 (10%) 2019 (20%) July 2020 Agriculture Construction Jan Jan Jan-Mar Jan-May Jan-Jul Jan-Sep Jan-Nov Jan-Mar Jan-May Jan-Jul Jan-Sep Jan-Nov Jan Jan-Mar Jan-May 2016 2017 Source State Statistics Service of Ukraine Source State Statistics Service of Ukraine Component contribution into real GDP growth, % 8.1% 6.3% 5.9% 1.8% 2.8% 2.5% 2.3% 2.4% (1.3)% (1.4%) (7.9%) (8.7%) Industrial production index (14.0)% Private consumption Jan-Jul Jan-Sep Jan-Nov Jan Jan-Mar Jan-May Jan-Jul Jan-Sep Jan-Nov Jan Jan-Mar Jan-Apr 2015 2016 2017 ■Gross fixed capital accumulation 2018 2019 Source State Statistics Service of Ukraine 2018 2019 Notes 1 To the corresponding period of the previous year on a cumulative basis BA 25 25#26Robust economic growth path (2/3) Comments Increasing consumer demand remains the main driver of Ukraine's real GDP growth Final private consumption grew by 11.9% (y-o-y) in 2019, whereas retail trade turnover growth started to slow down to 3.1% in Jan-May 2020 Consumer demand is driven by a number of factors, including among others improving consumer sentiments, rise in real wages, consumer lending and personal money remittances • Real wages went up by 1.4% y-o-y in May 2020 and by 6.9% y-o-y in Jan-May 2020 cumulatively with growth being supported by 13.2% increase in minimum wage in 2020 and increased competition for the labor force Real wages growth (%) and avg monthly nominal wages (UAH) 30% 14 000 20% 12 000 10 542 10% 0% (10%) (20%) (30%) (40%) 10 000 1.4% 8 000 6.000 4.000 Real wages index 2 000 Average monthly nominal wage, UAH 0 Jan-17 Mar-17 Private consumption and consumer sentiments evolution Source State Statistics Service of Ukraine Retail trade growth (y-o-y)1, % 20% 100 ៩ ៦ ៖ 8 ≥ 8 8 8 98 92 60% 15% 90 49 47 53 51 53 50 42 57 56 7.5% 8.2 5.3% 6.2% 7.5% 8.2% 63 62 59 59 60 58 66 65 ill 50% 10% 40% 5% 30% 0% 11.7% 10.7% 10.2% 20% (5%) (1.8%) (13.6%) 4.6% 2.7% 10% (10%) 12.0% 12.2% 8.5% 13.7% 11.7% 6.9% 70% (15%) 10 20(20.3% (19.0%) (27.0%) (10)% (20%) (20)% (25%) (21.7%) 0 (30)% (30%) (25.3%) July 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 Consumer sentiments index (eop) Private consumption growth, % (y-o-y) Source GFK, State Statistics Service of Ukraine ..السيسي 8.8% 5.8% Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 5.2% 7.4% 13.5% Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Note 1 To the corresponding period of the previous year on a cumulative basis Source State Statistics Service of Ukraine 3.1% 26 26#27July 2020 Robust economic growth path (3/3) Comments Industrial output remained relatively stable in 2019, although a number of sectors demonstrated upward dynamics, incl. production of concrete and cement products (+27.7%), chemicals (+12.9%), pharma products (+3.7%) Gross fixed capital went up by 14.2% in 2019 showing increased investment demand in Ukraine Capital investments witnessed 15.5% growth (y-o-y) in 2019, solidifying Ukraine's prospects for quick economic recovery post Covid-19 outbreak and economic growth in the following years Industry has been the major contributor to capital investments in 2019 accounting for c.40% followed by construction and agriculture with 10% and 10% shares, respectively Capital investments split by sector for in 2019, % Gross fixed capital accumulation, % (y-o-y)1 30% 27% 24% 19% 25% 21% 20% 20% 18% 18% 18% 17% 15% 15% 10% 5% 5% 0% 13% 13% 13% 10% 7% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 Source State Statistics Service of Ukraine Capital investments dynamics UAH bn 251 326 413 526 584 Industry 22.6 17% 19.4 40% ■Construction Agriculture 15.5 12.8 9% US$ 22.6bn 11.5 ■Trade 16.4% 15.5% 22.1% 7% Transport 18.0% 7% (1.7%) State administration and security 10% 10% Other Source State Statistics Service of Ukraine 2015 2016 2017 2018 2019 Capital investments, US$ bn Real growth, % Source State Statistics Service of Ukraine Note 1 To the corresponding period of the previous year on a cumulative basis BA 27 27#28July 2020 Appendix B YTD 2020 State and Consolidated Budget execution BA 28#29State budget execution (5m 2020) State budget general fund Overall state budget 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) 5m 2020 Actual 5m 2020 Plan % diff. 5m 2019 Actual 5m 2020 Actual % diff. 338,042 382,288 (12%) 426,721 388,260 (9%) 281,250 322,609 (13%) 322,959 306,027 (5%) 44,746 47,495 (6%) 41,629 44,746 +7% 53,586 52,207 +3% 50,118 53,586 +7% 11,879 19,155 (38%) 21,354 12,069 (43%) 26,557 27,123 (2%) 47,936 47,871 (0%) 135,676 166,656 (19%) 147,848 135,677 (8%) Export and Import duties 7,517 8,773 (14%) 12,134 10,402 (14%) Non-tax revenues 56,791 59,679 (5%) 103,762 82,232 +26% Expenditures (393,406) (471,093) (16%) (420,436) (438,376) +4% General public functions, incl.: (67,916) (106,085) (36%) (71,922) (68,993) (4%) Debt service (53,796) (59,319) (9%) (55,045) (53,796) (2%) Security and Defense (84,351) (96,182) (12%) (84,399) (92,419) +10% Economic activity (7,227) (10,535) (31%) (16,409) (26,431) +61% Protection of environment (1,272) (1,674) (24%) (1,411) (1,415) +0% Municipal utilities and services (5) (9) +69% Healthcare (23,007) (34,453) (33%) (11,254) (23,956) +113% Intellectual and physical development (2,650) (3,784) (30%) (2,948) (2,688) (9%) Education (12,807) (14,212) (10%) (19,245) (19,388) +1% Social welfare (137,675) (146,971) (6%) (96,479) (137,845) +43% Interbudgetary transfers (56,503) (57,198) (1%) (116,364) (65,232) (44%) Net lending 2,528 1,837 +38% 1,370 1,334 (3%) Primary balance 960 (27,649) (103%) 62,699 5,015 (92%) Overall state budget balance (52,837) (86,968) (39%) 7,655 (48,782) (737%) July 2020 Source State Treasury of Ukraine BA 29 20#30July 2020 Consolidated budget execution (5m 2020) UAH m Revenues Tax revenues Personal income tax and income charge Corporate profit tax Fee for the use of mineral resources Excises VAT (net of VAT reimbursement) Property taxes Export and Import duties 5m 2019 Actual 5m 2020 Actual % change FY 2019 Actual FY 2020 Plan % change 540,750 500,403 (7%) 1,289,849 1,291,312 (0%) 429,510 414,361 (4%) 1,070,322 1,070,551 (0%) 104,091 110,813 +6% 275,458 295,513 (7%) 55,084 58,757 +7% 117,317 108,046 +9% 23,783 13,886 (42%) 52,025 37,291 +40% 53,310 53,424 +0% 137,076 142,197 (4%) 147,848 135,677 (8%) 378,690 379,200 (0%) 14,891 12,072 (19%) 37,994 36,975 +3% 12,134 10,402 (14%) 30,086 28,621 +5% Other taxes and duties 18,368 19,331 +5% 193,577 42,708 +353% Non-tax revenues 111,240 86,041 (23%) 219,527 220,761 (1%) Expenditures (508,145) (533,662) +5% (1,372,351) (1,607,810) (15%) General public functions, incl.: (84,615) (83,210) (2%) (203,109) (289,251) (30%) Debt service (55,232) (54,168) (2%) (120,096) (146,678) (18%) Security and Defense (84,830) (93,093) +10% (250,322) (274,127) (9%) Economic activity (35,953) (47,542) +32% (154,218) (194,398) (21%) Protection of environment (2,083) (1,850) (11%) (9,731) (10,901) (11%) Municipal utilities and services (9,467) (9,889) +4% (34,490) (31,161) +11% Healthcare (43,435) (49,885) +15% (128,385) (162,290) (21%) Intellectual and physical development (10,493) (10,367) (1%) (31,550) (32,783) (4%) Education (89,748) (91,393) +2% (238,759) (265,353) (10%) Social welfare (147,521) (146,432) (1%) (321,787) (347,547) (7%) Net lending 1,255 1,282 +2% (4,763) (9,590) (50%) Primary balance 89,092 22,191 (75%) 32,832 (179,410) (118%) Consolidated budget balance 33,860 (31,978) (194%) (87,264) (326,088) (73%) Source State Treasury of Ukraine BA 30 30#31Appendix C Prudent debt management strategy July 2020 BA 31#32As of end-May 2020, Ukraine's total state and state-guaranteed debt (US$ 82.1bn / UAH 2,209bn) split between: • 59% of external debt, 41% of domestic debt 88% of state debt, 12% of state- guaranteed debt Prudent and proactive debt management strategy State and state-guaranteed debt structure (end-May 2020) (In US$ bn) State and state-guaranteed debt by currency, US$ bn Total (% of GDP) State debt State-guaranteed debt 79.1% 80.9% 71.8% 60.9% 50.3% Other external debt 4% Eurobonds 31% 2.8 22.6 IFIs 19% 13.9 US$ 72.4bn Domestic 5.0 in FX 7% 28.1 Domestic in Notes 1 Incl. outstanding debt obligations only July 2020 UAH 39% Domestic bonds 4% 65.5 71.0 76.3 78.3 84.4 82.1 6% 6% 8% 9% 10% 12% 0.4 Bank loans 19% 18% 16% 18% 17% 13% 13% 1.5 39% US$ 9.7bn 44% 45% 43% 39% 44% 7.8 IFIs 80% 30% 30% 30% 37% 29% 35% 2015 2016 2017 2018 2019 May-20 ■ UAH ■ USD ■ XDR EUR ■CAD JPY State debt amortization schedule (end-May 2020)1, US$ bn State debt dynamics, US$ bn Total debt service Total (% of GDP) 12.4 7.9 7.8 8.8 7.2 67.1% 69.2% 61.5% 52.3% 44.3% 74.4 72.4 65.3 67.2 3.8 60.7 55.6 35.0 33.1 1.7 26.8 27.5 24.7 2.9 3.0 4.6 21.2 2.7 4.5 1.6 1.4 1.3 1.1 1.4 1.7 1.4 2.0 34.4 36.0 38.5 39.7 39.3 39.3 2.4 1.9 1.7 1.5 1.3 2021E 2022E 2023E 2024E 2025E 2015 2016 2017 2018 2019 May-20 Interest Domestic debt ■Interest - External debt Principal Domestic debt Principal External debt ■State external debt State domestic debt Source Ministry of Finance 32 32#33Switching focus to UAH-denominated issuances on domestic market • Major development Domestic government bonds placements by currency Funds remitted to State Budget of domestic bond UAHM market with a focus on UAH- denominated issuances experiencing 3.5x 2019 issuance US$m volume increase as compared to 2018 32,755 65,128 UAH-denominated issuances 227,552 96,457 US$-denominated issuances 4,331 3,478 1,810 1,915 Based on 2020 revised state budget domestic bonds issuance is expected to further increase up to UAH 373bn in 2020 In line with MTDS objectives, FX- denominated issuances are kept relatively stable EURM 133.6 2017 498.5 387.2 EUR-denominated issuances 630 1 2018 2019 YTD 2020 Share of UAH-denominated debt in total state debt 33.4% 34.4% 41.0% Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Source Ministry of Finance Note 1 As of July 20, 2020 July 2020 BA 33 33#34Ukraine's domestic government bond holders Key highlights With a c.47.6% share, banks are currently the largest holder of domestic government bonds followed by the NBU, which accounts for c.37.5% of the portfolio¹ At c. 10.7% of total outstanding Ukrainian domestic government bonds as of July 20201, the portfolio held by non-residents increased by c. 1.3x times in UAH terms in the course of LTM 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 launched since May 2019 Domestic government bonds held by non-residents (eop) 2.9 3.5 4.1 4.0 4.3 4.9 4.9 5.2 4.3 4.1 3.9 3.7 3.4 In USDbn Domestic government bond holders¹ 3% 1% 37% 11% ■ Banks ■NBU 48% ■Non-residents ■Companies ■Individuals Nominal and real weighted avg yields at primary auctions, % 18.9% 19.0% 18.6% 16.9% 17.6% 23.89 25.6% 16.1% 21.0% 22.2% 26.4% 19.0% 20.3% 16.3% 22.7% 21.8% 10.9% 11.9% 12.3% 12.9% 14.1% 15.1 % 15.8% 14.1% 18.8% 18.1% 17.2% LLLL 16.7% 15.1% 10.0% 11.2% 9.4% 13.3% 10.2% 10.7% 10.6% 9.9% 7.8% 8.2% 11.9 11.4 10.7% 8.9% 6.8% 8.7% 8.4% 8.7% 7.9% 7.5% 7.2% 7.1% 8.2% 7.5% 6.4% 6.6% 5.7% 6. 5.9% 4.3% 4.1% 3.7% 1.5% 73.8 87.1 97.8 99.6 104.1 115.8 123.1 128.6 119.5 111.2 105.0 99.5 92.8 Notes 1 As of July 21, 2020 2 According to NBU's survey Jul 19 about inflation expectations of financial analysts for the next 12 months Oct Aug Sep Nov Dec Jan Feb Mar 19 19 19 19 19 20 20 Held by non-residents, UAHbn % of total portfolio (excl. NBU) Apr May Jun 20 20 20 20 Jul Jan 20 18 Apr Jul 18 18 19 % of total portfolio Oct Jan Apr Jul Oct Jan Apr Jun Jul 18 19 19 19 20 Nominal weighted avg yield, % 33 1 20 20 20 Real weighted avg yield, % 2 CPI expectations for next 12 months (y-o-y), % Source Ministry of Finance, NBU Source Ministry of Finance of Ukraine, NBU July 2020 ERVE 34 34#35July 2020 BB BB- B+ B B- CCC+ CCC CCC- CC RD Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Consistent upgrade in credit ratings Fitch Ratings Rating: B, Positive Last update: Mar 6, 2020, reaffirmed at B Key rating drivers of the last update: Improved policy consistency and credibility Significant progress in obtaining legislative approval for a series of reforms Improved macroeconomic stability underpinned by exchange rate flexibility, the NBU's independence and commitment to its inflation target, and moderate fiscal imbalances Low government debt A record of multilateral support STANDARD & POOR'S Rating: B, Stable Last update: Mar 13, 2020, reaffirmed at B Key rating drivers of the last update: BB- Declining government debt to GDP with improving profile Higher FX reserves Lower inflation and public deficits Ongoing implementation of reforms, which helps the government access commercial debt markets and receive concessional funding from IFIs The quality and predictability of monetary policy and financial sector supervision at the NBU being a noteworthy and highly positive development Mar 12 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 B B+ H B B- CCC+ CCC CCC- CC SD May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov 13 Nov-13 May-14 Nov-14 May-15 May-15 Nov-15 Nov-15 May-16 May-16 Nov-16 Nov-16 May-17 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 35 B#36July 2020 Appendix D Proactive reforms across wide range of pillars 36 36 BA#37Public governance Key areas Challenging reforms start bearing fruit (1/2) Parliament: pro-Western parties with majority of mandates ▷ Decentralization: transfer of budgetary powers to local self-government bodies ▷ Anti-corruption: full anti-corruption infrastructure in place 2019-2020 update ⚫ New Supervisory Boards in state- owned banks commenced their work (Jun and Dec 2019) • Law on criminalization of illicit enrichment adopted (Oct 2019) • High Anti-Corruption Court (HACC) commenced its operations (Sep 2019) Selected results 90% increase in revenues of local budgets in 2019 vs 2015 50 directorates with 1,305 new reform staff positions in civil service 892 criminal proceedings by the NABU with 245 cases filed to the courts Public finance Taxation: decrease in number of taxes and reduction in tax rates Debt management: MTDS, return to markets, significant involvement of international investors and effective investor relations, DMO approval Medium-Term Budget Planning introduced Public expenditures and procurement: electronic procurement system fully effective • US$ 5.0bn Staff Level Agreement with the IMF (May 2020) • Financial Sector Development Strategy 2025 adopted (Jan 2020) Split and relaunched Fiscal and Customs Services (Sep, Dec 2019) ⚫ Link between Clearstream and NBU depository launched (May 2019) 18-fold increase in non- residents' domestic government bond portfolio to US$ 4.9bn over 2019 50% of 2019 GDP - state and state-guaranteed debt (vs 81% in 2016) 11 number of taxes (vs 22) Business climate ▸ Foreign trade: DCFTA in full force, FTA with Israel signed in early 2019, FTA with Turkey under negotiation ▷ Competitiveness and Deregulation: a great leap forward in international rankings ▸ Investment climate: introduction of effective mechanisms for dealing with bankruptcy • Law on agricultural land sale adopted (Mar 2020) • Law on concession signed by the President (Oct 2019) • Restrictions on privatization of a list of SOEs canceled (Oct 2019) ⚫ SME Development Office launched (July 2019) Ease of Doing Business ranking improvement to 64th in 2020 report, 48 places up from 2014 USD 2.4bn FDI to Ukraine's real sector in 2019 530 SOES were handed over to the State Property Fund for privatization in 2019 BA Sources CMU, Ministry of Finance, NBU, NABU July 2020 37#38Sources CMU, NBU, Naftogaz, EC, IMF Financial sector Energy sector Key areas Challenging reforms start bearing fruit (2/2) Monetary policy: inflation-targeting framework ▸ Banking sector: sector clean-up, currency controls liberalization ▸ NBU role: enhancement of the NBU'S supervisory and regulatory role Energy sector diversification: intensified domestic extraction and complete substitution of Russia in favor of the EU for gas imports since late 2015 Liberalization of energy markets: transition of electricity market to European model, increase in levels for gas and heating tariffs, elimination of operational deficit of Naftogaz of Ukraine "The new Stand-By Arrangement will provide an anchor for the authorities' efforts to address the impact of the crisis, while ensuring macroeconomic stability and safeguarding achievements to date. The program will focus on safeguarding medium-term fiscal sustainability, preserving central bank independence and the flexible exchange rate, and enhancing financial stability while recovering the costs from bank resolutions" Ms. Kristalina Georgieva, Managing Director and Chair of the IMF June 9, 2020 2019-2020 update Banking law adopted (May 2020) ⚫ Draft AML Law implementing 5th EU AML Directive became effective (Apr 2020) Law on split of supervisory functions between financial markets regulators ("Split Law") adopted (Sep 2019) . New liberalized currency regulation system (Feb, Sep 2019) Unbundling of Naftogaz gas transmission system completed (Jan 2020) Receipt of compensation by Naftogaz following its victory over Gazprom in Stockholm Arbitration (Dec 2019) Bringing gas prices for households closer to market level (Apr 2019) Selected results UAH 60bn record high profits posted by the Ukrainian banking sector in 2019 20+ FX restrictions lifted 105 banks withdrawn from the market over 2014-2019 US$ 2.9bn received as compensation from Gazprom in Stockholm Arbitration 14.9 bn m3 of gas volume extracted by SOE Ukrgazvydobuvannia in 2019 "The Ukrainian authorities have made progress with reforms over the past year, notably in areas that will help to create the foundations for future growth and prosperity for Ukrainian citizens. Many newly adopted laws now await implementation, and the European Union will continue to be there to accompany this process" Mr. Oliver Varhelyi, EC Commissioner for the Neighbourhood and Enlargement December 13, 2019 July 2020 38#39July 2020 非 MINISTRY OF FINANCE OF UKRAINE BA 39