Political risk; IMF; macro outlook; parliamentary elections; relations with Moscow; liqudity issue; banking sector
By Timothy Ash, Global Head of Emerging Markets, Research & Strategy
Royal Bank of Scotland (RBS), London, UK, Wednesday, May 16, 2012
LONDON --- We visited Kiev on May 14-16, 2012 meeting with officials from the MOF, the IMF, the World Bank, alongside meeting with deputies from the Verkovna Rada, and diplomats, local journalists, banks, and corporates. Officials from the NBU did not make themselves available to meet investors.
SUMMARY VIEW: Political risk has again taken centre stage with the conviction and jailing of leading opposition figures in recent months provoking heavy criticism from the EU/US and raising the potential for a freezing of the country's EU integration bid. This comes as relations with Russia remain difficult, as Moscow refuses to provide cut-price energy without securing control of strategic assets in the energy sector; near impossible for any Ukrainian politician to deliver just before elections.
The resumption of IMF lending seems unlikely until after parliamentary elections due in October, and hence the government will have to get by under its own resources until then. The elections are expected to be close run, with concern that gerrymandering by the ruling Regions party could see further international isolation and potential street protests. The government seems intent on holding the UAH fixed until elections, but more flexibility is expected after this date.
Recent durability on the balance of payments front could be tested in the run up to elections, when locals typically buy FX, and given broader global risks – the Eurozone crisis, plus a sharper slowdown in China, a key market for Ukraine's main export product, metals.
POLITICAL RISK - RISING
Political risk perceptions have increased noticeably over the past year, and specifically since the arrest, subsequent jailing and conviction of a number of prominent opposition politicians, including the leader of the main opposition party (Batkivshina) and former prime minister, Yulia Tymoshenko, and her ally and the former minister of interior, Yuriy Lutsenko. These arrests appear to have divided opinion within Ukraine.
Both politicians have been charged and convicted of abuse of office, and Tymoshenko also faces new charges of corruption relating to her stints running a large energy utility in the 1990s. The opposition politicians and indeed diplomats we met argued that the charges appear politically motivated, aimed at ensuring that Tymoshenko – arguably the strongest, most dynamic politician on the campaign trail in Ukraine – is unable to run in parliamentary elections due to take place on October 28, 2012.
Note that under the current Ukrainian penal/criminal code, a conviction for abuse of power bars politicians from running in elections – there has been external pressure on the Yanukovych administration to decriminalise this offense but thus far there has been little legislative progress. Supporters of the ruling Yanukovych regime instead argue that the case/conviction against/of Tymoshenko and other opposition politicians is simply judicial, as the administration aims to clean up domestic politics and root out corruption/abuse of office.
The opposition and foreign diplomatic community counter that the cases against Tymoshenko/Lutsenko were flimsy, and imply selective use of justice as similar claims/cases could easily be made against members of the ruling Yanukovych administration and its allies. The opposition and the foreign diplomatic community also argue that the convictions of Tymoshenko, et al, are now part of a worrying trend towards greater authoritarianism in Ukraine, where basic democratic rights and freedoms (hard won during the Orange revolution) are being undermined.
The proponents of this view highlight that this started soon after Yanukovych victory in the 2010 presidential election with changes to parliamentary procedure that enabled the formation of a majority Regions administration by allowing deputies to "cross the floor", rulings by the constitutional court that strengthened the role of the presidency, revisions to the electoral law creating a duel PR/first past the post system, which is likely to favour the ruling party and, more generally, intimidation of opposition MPs, and business leaders. They argue that all this raises the risk that parliamentary elections due in October will not be free and fair.
The Tymoshenko affair has stepped up a gear in recent weeks, following allegations of mistreatment of Tymoshenko in jail, and this has led to a number of EU member states announcing political boycotts of the forthcoming UEFA European Football Championship in Ukraine, while also reducing cooperation with Ukraine more generally, including the boycott of a recent meeting of regional leaders in Yalta.
More damaging perhaps to Ukraine, the EU is delaying signing its Association and FTA with Ukraine, which has been long in preparation and is seen by both sides as providing an important European anchor for Ukraine. Relations between Ukraine and the EU reached something of a low point over the past week when Angela Merkel, the German Chancellor, drew a comparison between Ukraine and Belarus, by suggesting both were dictatorships in Europe.
Most observers we met (from both sides of the political spectrum) suggested that Merkel's comments over-stepped the mark, and were particularly insensitive coming from a German leader in a week where Ukraine, and other CIS countries, were engaged in their annual commemoration of those that died during WWII.
However, the comments have encouraged both sides to take something of a time-out, for reflection. The EU, while eager to encourage the Yanukovych regime to respect basic democratic standards, is also eager not to push Ukraine further away, into the Eastern sphere of influence, with the risk indeed that it eventually lurches more towards an authoritarian model.
There seemed to be widespread unease among locals and diplomats we met, over the Tymoshenko case and some incredulity as to the motivations behind the arrests of opposition leaders. Clearly these are high-risk moves by the administration that we think could easily backfire, both in terms of undermining foreign relations but also by potentially boosting support for the opposition in the run up to the parliamentary elections.
The hope from the EU, US, and even Russia (Putin has called for Tymoshenko's release) is that Tymoshenko will be freed before elections, and the penal code changed to allow her to run in parliamentary elections. That said, the over-whelming opinion of the diplomats/journalists and analysts we met was that Tymoshenko is unlikely to be released any time soon.
Opinions as to the motivations behind Tymoshenko's arrest were diverse. Included in the various explanations given were the following:
(1) The official line is as above, ie, that this was simply a judicial process, and she is now paying the price for past abuse of office, and potentially alleged corrupt practice if follow-up charges are
proved.
(2) The opposition/diplomats argue that this was simply a political calculation by Regions, to boost its chances of winning the parliamentary elections – ie, by taking out key opposition figures in a very
closely run election.
(3) A further conspiracy theory is that Tymoshenko's arrest was somehow related to the dispute with Russia over gas pricing, and was undertaken as a means to improve Ukraine's negotiating
position with Moscow. The logic herein seems to be that as the conviction of Tymoshenko related to her signing of the 2009 gas price agreement with Russia, any suggestion that she had acted
illegally has the potential to undermine the legal basis of that agreement, perhaps allowing Ukraine a window to renegotiate that deal. We note that the Yanukovych administration argues that the
2009 agreement was unfair to Ukraine, allowing Russia to charge prices for gas exports to Ukraine above the regional norm.
(4) Fourth, her arrest simply reflects a settling of scores between elites, and particularly reflects the bad feeling that exists between Yanukovych and Tymoshenko – during the 2010 presidential
election campaign Tymoshenko launched a bitter and scorching personal attack on Yanukovych.
Among those we met there was a fairly universal view that Yanukovych is now unlikely to sanction the early release of Tymoshenko. The feeling was that the administration has increasingly dug itself into a corner over the issue and is now unlikely to want to be seen to back down for fear of being seen as weak, and thereby undermining its position in the run up to elections. There was also an assumption that if the arrest/conviction related to domestic party politics there would still be a strong incentive on the part of Regions to keep Tymoshenko out of the election campaign.
Finally, the argument was made that by pursuing legal action against Tymoshenko et al, the Rubicon had in fact now been crossed, and the incumbents in power would fear similar treatment from their own victory should they now be forced from office.
FOCUS ON PARLIAMENTARY ELECTIONS
Opinion polls suggest a closely fought contest is now likely in October's parliamentary elections. Support for the ruling Party of the Regions has collapsed to 15-20% (halving over the space of two years, and noticeable even in the party's heartland in eastern Ukraine), a reflection perhaps of Ukraine's relatively weak recent economic performance and the lack of adequate trickle-down effects, concern over the Tymoshenko case, and arguably the broader ineffectiveness of the Regions regime to bring a meaningful change in ordinary Ukrainian's lives – the gap between the Oligarchs/elite "family" clan around Yanukovych and ordinary Ukrainian just appears to be widening in many peoples' perspectives.
The problem for the opposition is that they are struggling to capture voters disenchanted with the incumbents, as general malaise with Ukraine's political class currently runs deep. Note herein the in-fighting/divisions between the leaders of the Orange revolution during the presidency of Viktor Yushchenko, have also left the pro-Europe, Orange constituency significantly disillusioned with all parties, and not just Regions.
The opposition have attempted to counter these trends by consolidating for the elections, with Tymoshenko's party, running on a joint party list with the Front for Change of Arseny Yatseniuk another prominent opposition leader, in a two plus four formulation of two large opposition parties and four smaller parties (including the nationalist Rukh party). Opinion polls, however, show the united opposition only polling on par with Regions of Ukraine, suggesting a tight-run contest come October.
Changes to the electoral law, combining a PR and a first-past-the-post voting system, also present another threat to the opposition. The first-past-the-post system is likely to see a large number of independents, and oligarchs/business leaders, being returned to parliament in the constituency elections (50% of seats will be decided on this basis). Past experience has, however, suggested that party allegiance of deputies is generally weak, as political patronage by the party in power has traditionally been a powerful tool for deputies switching allegiance.
There is also some concern as to whether the formal opposition alliance of parties will hold together, especially as Yatseniuk himself served under the former Yanukovych administration. The fear is thus that Yatseniuk and his supporters will eventually forge a ruling coalition with Regions, suggesting status quo in terms of Regions' domination. In recent months though Yatseniuk has been a much more ardent critic of the Yanukovych regime, highlighting its weakening democratic credentials and speaking out in defence of the opposition leaders currently in jail.
ORANGE REVOLUTION II
One focus for discussion during the trip was how the electorate would react to a situation where Regions managed to secure a parliamentary majority with only a small share of the popular vote – either through the failings of the new electoral law, using political patronage to capture independent deputies, and/or outright vote rigging. Members of the opposition we met signalled that opinion polls reveal a high willingness on the part of the population to partake in street protests (>50%), indeed much higher ratings than the low single digits in favour of such action seen prior to the Orange revolution.
The suggestion is thus that the population is now much more ready to protest. However, a key question is who would lead such street protests, if the key dynamo from 2004/05, Yulia Tymoshenko, remains jailed, while Yatseniuk appears as a much more cautious political leader, with more limited mass oratory skills. Arguably the Orange revolution happened due to a complex range of factors coming together at one time, but the question is would similar factors align this time around. Herein we heard very mixed views.
The other related question discussed was how the EU/US would react to elections that are deemed not adequately free and fair – unlikely to be the case if key opposition leaders remain in prison and unable to participate/campaign. Such opposition might be dissipated if Yatseniuk is somehow brought into the Yanukovych regime, and/or the regime then decides to release opposition leaders and push ahead with broader reforms, including trying to bring the IMF programme back on track.
RELATIONS WITH RUSSIA - MOSCOW PLAYS HARD TO GET
One commonly held thesis is that the cornerstone of Ukraine's post-independence foreign policy has been that of "milking both cows", ie, playing Russia, to which Ukraine has strong historical, cultural and economic ties, off against the West, and the EU in particular, membership of which many Ukrainians still aspire. This thesis would suggest that Ukraine's push for EU/NATO membership has been played as a means to secure economic concessions from Russia, in particular market access for Ukrainian products, and cheap energy imports.
For much of the post-independence era this strategy succeeded in that Ukraine consistently managed to secure discounted Russian gas/energy and favourable payment terms/loans from Moscow. After the Orange revolution, and the assumption by Moscow that Ukraine was plying a much more European-bound course, Moscow became much less willing to give way in terms of supplying cheap energy.
After several mini-energy wars this eventually resulted in the 2009 gas price agreement, which in effect ended cut price energy supplies to Ukraine – at least on the state level, albeit individual Ukrainian business groups are still thought to benefit from favourable gas pricing terms from Moscow.
The Yanukovych administration has sought to renegotiate the 2009 agreement and in 2010 managed through the Kharkiv agreement, to get a one-off, one year long, USD100 per 1,000 cu metres discount on imported Russian gas. This agreement ended in 2012, and this year Ukraine has been paying over USD400 per 1,000 cu metres of gas imported from Russia (42 billion cu metres of gas contracted to be imported on a "take or pay" agreement), over 4 times the level charged before the Orange revolution.
The government is still pushing for a new deal with Russia, but with the deterioration in the relationship with the EU over the Tymoshenko case, and failure to secure new IMF financing, Ukraine appears to have undermined its own negotiating position, burning the bridge with the EU, and leaving it now wholly dependent on Moscow for financial support. Moscow seems eager now to exploit this new potential dependency. Thus from a policy of "milking both cows" the new strategy appeared to be one rather of "putting all its eggs in one basket".
The assumption within the Yanukovych regime appears to have been that, faced with the prospect of being able to draw Ukraine back into its sphere of influence, Moscow would eventually cave in, providing cheap energy and financing for Ukraine. However, events seems to suggest that the Yanukovych regime miscalculated, misreading the evolving strategy of Russia towards the "near abroad" perhaps now best reflected in how Moscow has recently managed support for neighbouring Belarus in the wake of its own balance of payments crisis.
Moscow's overall strategic goal appears to be to bind back former Soviet states to Moscow, via is newly created CIS Customs Union, and the planned Eurasian Union which is closely modelled on the EU itself. Economic and eventually perhaps political (re)union appears to be the long term vision in Moscow for the near abroad, but hard business and strategic interests also underpin this. In the case of Belarus and Ukraine, Russia wants control of strategic assets, more particularly energy transit infrastructure, e.g. gas pipelines.
In both Belarus and Ukraine this has been the goal since the collapse of the CIS, and each year Moscow has undergone a painful bargaining cycle with both Kiev and Minsk offering cheaper energy but trying to secure ownership/control of pipelines. In both cases the strategy failed as elites saw these assets as one of their few remaining levers with Moscow to ensure long-term discounted gas deliveries. Moscow has always tended to blink first in the past, perhaps worried over a popular backlash against Russia across the region.
However, the past year saw a much harder stance from Moscow. Thus, in the case of Belarus' appearing willing to allow a BOP crisis/devaluation before finally providing bail-out loans and cheap energy but only after hard contracts were negotiated allowing control over energy sector assets. This strategy now appears to be being pursued towards Ukraine – after the new, hard nosed, policy appeared to work to finally deliver control of assets in Belarus.
Moscow has thus resisted every Ukrainian overture calling for cheap energy/bail-out loans this year, and would appear willing to see the UAH tumble this time around unless control over pipelines in ceded. While there would appear to be some in the Yanukovych administration willing to cede control of energy sector assets to Russia, the consensus is that this would be all but political suicide for any Ukrainian administration this side of elections, and especially for the incumbent regime which is suffering from such low opinion poll ratings.
The Yanukovych administration has thus more or less isolated itself from its two prior financing sources, the West/EU and international capital markets in effect, and also Russia. The Yanukovych administration has thus had to fall back on its own resources, and this currently appears to be the plan.
RELATIONS WITH THE IMF - NO RESUMPTION OF LENDING BEFORE ELECTIONS
The existing SBA agreement reached with the IMF soon after the presidential elections in March 2010 went off track in a matter of months after its launch over the moot issue of energy pricing. The IMF had demanded a staggered process of energy price hikes beginning in 2010, to move domestic prices to cost recovery levels. In the event the government appeared reluctant to raise gas prices, as demanded by the IMF, fearful of the domestic political cost – household gas prices stand at a fraction of cost recovery levels, and impose a hefty burden on the state budget via resulting subsidies paid to the state owned gas transit company to cover losses.
The government has asked the IMF for flexibility over the gas pricing issue, arguing that if it is able to find alternative budget savings to cover the cost of energy subsidies, and to ensure the maintenance of the 2.5% fiscal deficit agreed with the IMF for 2012, then the Fund should cut them some slack. The Fund has thus far refused to budge, arguing that energy price hikes are important not only for ensuring longer-term fiscal sustainability but also more broadly ensuring broader efficient resource allocation and energy efficiency/conservation.
With the government now refusing point blank to raise gas prices this side of parliamentary elections, and the Fund now also raising wider questions as to the sustainability of broader fiscal targets given weaker macroeconomic fundamentals, and budget spending revisions made in April which add around 2% of GDP to public expenditure, it is difficult to imagine IMF funding resuming this side of elections, unless Ukraine suffers another BOP/financing crisis in the interim, and the government is then forced to go cap in hand to the IMF.
Note though that the general assumption is that after elections the Yanukovych government will then likely return to the negotiating table with the IMF, and then will be more willing to concede gas price hikes – assuming the elections produce a clear victory for Regions and its allies.
SO CAN UKRAINE SURVIVE ON ITS OWN RESOURCES UNTIL ELECTIONS?
The Yanukovych administration now appears intent, even confident, that it can survive until elections, from its own resources.
HOLDING THE UAH TO ELECTIONS WILL STILL BE TOUGH On the external financing front, fears over near term devaluation risk have receded, with the assumption that the NBU can maintain the current exchange rate peg until after elections – beyond then the NBU policy is expected to be pragmatic, likely responding then to IMF pressure for more FX flexibility, which is likely at that point to result in FX weakness.
NBU FX reserves, which dropped quite precipitously in H2 2011 (dropping USD8bn in the space of six months, and by USD3bn in September 2011 alone), have stabilised at just under USD32bn. Reserve flight accelerated in mid-2011 due to a combination of factors, including a deterioration in the political environment (arrest of opposition leaders), the lack of agreement with the IMF, concern over a copy-cat BOP crisis as was playing out in Belarus not helped by Ukraine's own widening CAD and large external financing requirement (CAD ~ 5% of GDP, plus >USD50bn in external debt amortisations falling due over the year), plus broader global risk factors (Eurozone).
The NBU managed to stabilise the situation by tightening domestic liquidity and hiking policy rates, and was helped by an easing of global pressures (LTRO-II) and some evidence of a moderation in the CAD, as tightening policy slowed import growth and high metals prices underpinned exports – note that in our recent Turkey visit, Turkish steel producers complained of dumping by their Ukrainian counterparts.
There was also evidence of a pick up in FDI inflows, and relative success by Ukrainian corporates/banks in rolling over external debt liabilities – note a high share of these liabilities consist of intercompany loans which are more liable to be rolled in times of crisis. On this latter note there is a sense that domestic oligarchs began to bring capital back on-shore, perhaps encouraged by opportunities on the privatisation front, and maybe some vested interest in supporting the incumbent regime.
Expectations for the run up to parliamentary elections are that the CAD will remain on a flat/improving trend, perhaps helped by inflows associated with Euro-2012, albeit these are only likely to amount to several hundred million dollars. There is also an assumption that the reverse capital flight will continue – friendly oligarchs will be encouraged to bring cash/capital back on shore to support the incumbent Yanukovych regime.
This ability to self-finance itself, via oligarchic inflows should not perhaps be underestimated, given estimates of as much as USD70bn in cash existing outside the banking sector, and offshore. Meanwhile, the NBU can still draw on its FX reserves, and is expected to do, to hold the UAH this side of elections – a strong currency is generally seen as a sign of health in Ukraine.
The above said, significant caveats need to be added herein. First, assumptions over oligarchic inflows/outflows are subjective by nature given these individuals tend to try to keep their wealth beyond official sources. Second, Ukrainians have a track record for buying FX in the run up to parliamentary elections. The general assumption domestically is that the UAH will hold till October, but then be allowed to weaken thereafter, which might suggest some individuals might start buying early.
The experience of Ukraine in September 2011, and indeed Belarus early last year, was that this retail buying of FX can become a powerful self fulfilling force, and official FX reserves could easily be quickly depleted in such a scenario. A weak global backdrop – note on-going FX weakness amongst regional peers (PLN, HUF, RUB) - could also easily spook the market, especially when domestic risks/concerns are building.
The assumption that the CAD might continue improving might also prove optimistic, if the expected fiscal pump priming begins to seep into import demand, and the extra UAH liquidity pumped into the market, might also eventually feed back out into increased demand for FX. A weakening in China growth might also more heavily weigh on metals/steel prices, again undermining exports and the CAD position in the process.
IT IS MORE PROBLEM OF LIQUIDITY THAN SOLVENCY IN PUBLIC FINANCES
On the budget financing front, at face value the MOF's position looks difficult but not untenable. Budget plans for 2012 target a budget deficit of UAH25.1bn (1.8% of GDP estimated at UAH1,500 for the full year), which with debt amortisations of UAH65.9bn (UAH34.6 domestic, UAH31.3bn external), implies a gross financing requirement of UAH90.1bn.
The MOF actually planned gross issuance of UAH98.5bn for the full year, with an additional UAH10bn in receipts expected from privatisation – suggesting sources of financing, if fulfilled, of UAH108.5bn. The excess from central budget financing (UAH17bn) was scheduled to cover UAH12.5bn in transfers to the state gas transit company, and an additional UAH5.5bn to fund the recapitalisation of the same entity.
YTD the MOF reported UAH32bn in gross issuance, with some success in FX-denominated and FX linked instruments, benefiting from relatively flush liquidity in the banking system – banks were reported to have over USD9bn in USD and over EUR 2bn in correspondence accounts. The government had also managed to generate around UAH5bn from state asset sales to date (oblenergos) and appeared confident that the full-year target for privatisation receipts could be met, especially given recent deals for the sale of oil exploration rights which yielded as much as UA6bn.
As of this week, according to the MOF, it had UAH12bn in FX and UAH3-bn in cash on its single Treasury account.
In terms of other sources of financing, the MOF appeared optimistic that a deal had been done to significantly refinance the USD2bn loan extended by a Russian state owned bank, with suggestions that this will be partially rolled into a new Eurobond, with some cash repayment. Assuming half is rolled into a new Eurobond, this implies UAH45bn of the UAH117bn financing sources have thus far been covered as of mid-May, with note still of the UAH15bn in the single Treasury account.
Presumably also the now close relationship between the MOF and the NBU also provides the prospect that in a worst-case scenario the NBU might creatively look to cover the government's financing needs by perhaps going through state owned banks to provide liquidity to the sovereign.
The government seemed confident that the UAH12.5bn plan for subsidies paid to the state owned gas transit company could be capped, despite no domestic gas price hikes, and higher energy import prices this year.
On the question of the target for the central budget deficit, UAH25.1bn, again government officials appeared confident that this could still be attained, despite large hikes in pensions, public sector wages and other state spending approved by parliament in April as part of a package worth the equivalent of 2% of GDP. The government assumes that budget revenues will increase by an equivalent amount, hence they have kept the 2.5% of GDP budget deficit target agreed with the IMF.
The obvious concern is that with real GDP growth likely to underperform expectations and inflation also moderating, nominal GDP growth will also be contained, likely putting a cap on budget revenue growth. Government officials though again seemed confident that increased tax compliance could ensure higher budget revenue targets are met, keeping an overall cap on the budget deficit. Indeed, thus far this year budget revenue growth has been strong YOY (>12% revenue growth for the period January – April 2012).
Anecdotal evidence does suggest that pressure is being put on both companies to pre-pay tax ahead of elections, to bolster the government's election war chest. Indeed, this has been a tendency in the run up to previous elections, suggesting tighter revenue conditions once elections are out of the way.
There was some discussion as to why the market appeared to penalise Ukraine, by demanding much higher spreads than its peers, despite the relatively modest debt/GDP ratios (~30%). Ukraine's problems though are more ones of liquidity than solvency, at least in public finance space, and especially where external sources of financing have been closed off to the elections because of the deterioration in the political environment.
BROADER MACRO OUTLOOK - GROWTH DISAPPOINTS
First quarter real GDP growth disappointed, moderating to just 1.8% YOY which probably reflects a tightening in monetary policy as the NBU sought to stabilise the UAH, and perhaps given broader regional concerns, eg, the Eurozone.
Fiscal pump-priming in the run up to elections could boost growth in Q2 and Q3, but last year's bumper agricultural season provides unfavourable base period effects, while we think the new government emerging after parliamentary elections in October will need to tighten policy to rein in the electoral excess which will in turn slow growth. Hence, real GDP growth is likely to come in at 1-2% for the full year in 2012, below the government's 3.5% forecast.
Inflation has dropped to low single digits, benefiting still from the good agricultural season ,stalled utility price hikes, relative stability in the UAH, plus tight policy by the NBU. These factors are likely to begin to unwind later in the year, while base period effects will turn less positive.
As noted above, the current account deficit is expected to come in at 4-5% of GDP this year. Fears over strong upward pressure from higher gas import prices have been partially alleviated by much reduced overall imports of gas, as the country has been able to draw upon gas imported and held in storage in 2011 when import prices were lower. There also appears to have been continued efforts at energy conservation which has reduced energy consumption further.
BANKING SECTOR - MODEST SIGNS OF RECOVERY
The banking sector appears to be gradually emerging from the problems of 2008-2011, with the sector beginning to show profits and some balance sheet expansion. Foreign owned banks (40% of the sector) remain cautious, with much of the on-going expansion concentrated in a small number of aggressive domestically owned banks.
NPLs remain high – 30%+ across the sector – albeit NPLs on new loans appear much lower a reflection of the stability/growth in the economy plus perhaps better risk management by banks themselves. The sector remains relatively liquid, and the government has taken advantage of this to increase issuance of domestic government debt.
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