Ukraine gross reserves rise 0.8% in August

Ukraine’s gross international reserves rose 0.8% m/m,
or USD 175 mln, to USD 22.0 bln in August after increasing 5.8% m/m in the previous month,
the National Bank of Ukraine (NBU) reported on Sept. 6. The net purchase of
foreign currency by the central bank on the ForEx market compensated outlays
related to redeeming and servicing foreign currency debt.

The situation on Ukraine’s ForEx remained favorable in
August, the NBU said, stressing that it continued purchasing foreign currency
and thereby replenishing reserves by USD 299.4 mln. This inflow slightly
exceeded August outlays of USD 257.5 mln related to servicing debt in foreign
currency. This amount included a payment to the IMF of USD 89.7 mln, foreign
debt servicing of USD 33.7 mln, and local Eurobond servicing of USD 23.0 mln.

The central bank also reported an increase in the
value of its securities portfolio of USD 133 mln (adjusted to market value and
the currency exchange rate).

As of Sept. 1, Ukraine’s gross reserves amounted to 3.5
months of imports, the NBU said.

Evgeniya Akhtyrko: Our
forecast has proven right that central bank purchases on the ForEx will compensate state outlays
in foreign currency in August.

This month, Ukraine faces significant outlays in
foreign currency. On Sept. 3, Ukraine’s Finance Ministry spent USD 661 mln on
redeeming a Eurobond issued in 2015, alongside USD 25 mln for the last coupon
on this bond and USD 420 mln for coupons on other bonds restructured in 2015
and maturing in 2020-2027. In addition, September payments to the IMF will
amount to around USD 560 mln.

To compensate these losses, the NBU is likely to
continue with foreign currency purchases on the ForEx. In addition, MinFin will
offer 18M and 24M USD-denominated bonds at its auction on Sept. 10. The demand
for newly placed local Eurobonds is likely to be high, given the abundant
supply of foreign currency on the market. Recall, receipts from the latest
local Eurobond placement on July 16 amounted to USD 1 bln.
Factoring all these ins and outs, we expect September gross reserves to decline
by 1-2% m/m.