Ukraine seeks billions as Russia 'hysteria' squeezes Kyiv out of debt market, say govt adviser

By Natalia Zinets

KYIV, Jan 27 (Reuters) - Ukraine wants to borrow about $5 billion from international organisations and bilateral aid as borderline "hysteria" over the threat of a Russian attack limits its access to capital markets, a presidential adviser told Reuters on Thursday.

Ukraine had planned to issue new Eurobonds to cover part of its budget deficit of 3.5%, but may struggle to do so as worries over a possible Russian offensive pounded Ukrainian and Russian bonds and weighed on both currencies.

The hryvnia fell to its lowest level since February 2015 on Thursday, Refinitiv data showed.

Russia has massed tens of thousands of troops near Ukraine's borders, though it denies plans to attack its neighbour. Ukraine's leadership has appealed for calm while pressing allies to supply military hardware and ready sanctions on Moscow.

Oleg Ustenko, the adviser to President Volodymyr Zelenskiy, did not rule out borrowing on the capital market but said it was "not impossible, but extremely difficult".

"In the context of a sharp increase in the degree of discussions around issues related to the security of Ukraine, which sometimes border on hysteria, the country's opportunities for entering foreign capital markets are limited," he said.

He added that under such conditions, Ukraine had to look at other sources of financial aid rather than open markets to secure its "financial cushion".

"The targeted amount of support is $5 billion. The sources of such a cushion can be both - bilateral, with partner states, and multilateral loan agreements, with international and European institutions," he said in written comments.

The $5 billion includes the $2.1 billion already earmarked as financing from the International Monetary Fund, he said.

The European Union promised this week to help Ukraine with a 1.2 billion euro financial aid https://www.reuters.com/world/europe/eu-offers-ukraine-12-bln-euro-aid-package-2022-01-24package to mitigate the effects of the conflict with Russia.

Ustenko declined to name other sources that Ukraine was hoping to tap.

(Editing by Matthias Williams and Alex Richardson)