Ukraine gross reserves decline 2.6% in September

Ukraine’s gross international reserves declined 2.6%
m/m, or USD 577 mln, to USD 21.4 bln in September after increasing 0.8% m/m in August,
the National Bank of Ukraine (NBU) reported on Oct. 7. The decline was due to
high repayments on state debt.

 

In particular, the central bank reported the government
and the NBU paid USD 1.97 bln (in the equivalent) on the redemption and
servicing of state and guaranteed debt in foreign currency. Outlays for
international Eurobond redemption and servicing amounted to USD 1.22 bln. In
addition, IMF payments totaled USD 561 mln. The rest of outlays included
obligations to international creditors and international financial
organizations.

 

State spending in foreign currency was partially
compensated by receipts from the placement of local Eurobonds for USD 547 mln.
In addition, the favorable situation on the local ForEx enabled the NBU to
intensify foreign currency purchases for replenishing international reserves.
In September, such purchases amounted to USD 930 mln in the absence of foreign
currency sales by the NBU.

 

The central bank also reported a decline in the value
of its securities portfolio of USD 80.8 mln (adjusted to market value and the
currency exchange rate).

 

As of Oct. 1, Ukraine’s gross reserves amounted to 3.4
months of imports, the NBU said.

 

Evgeniya Akhtyrko: The
September decline in gross international reserves was expected as the capacity
of the local market for generating foreign currency supply was not enough for
compensating the currency outlays in the peak months of foreign debt repayments.

 

This month is relatively easy in terms of state
repayments in foreign currency. MinFin is to spend USD 476 mln on redeeming and
servicing local Eurobonds in October. Meanwhile, the government isnt’ planning
any placements of local Eurobonds through the year end, which could have drawn
foreign currency receipts for replenishing the international reserves.

 

Moreover, the situation on the local ForEx in not
likely to be favorable for NBU ForEx purchases. So far this month, the national
currency – which enjoyed almost a year-long period of appreciation – began to
quickly lose its strength. In the first week of October, the NBU had to spend
USD 200 mln for smoothening out the excessive demand for foreign currency at
the market.

 

In the absence of new borrowing in foreign currency
and with the low likelihood of NBU ForEx purchases, we expect gross reserves to
lose another 2-3% in October.