Ukraine reserves reach USD 16.7 bln on IMF, EU loans

Ukraine’s gross international reserves rose to USD 16.7 bln as of April 5 owing to a USD 1 bln IMF loan trance and a USD 600 mln loan from the EU, the National Bank of Ukraine (NBU) reported. Reserves swelled from USD 15.1 bln as of April 1. Current reserves are enough to cover 3.6 months of future imports.

Alexander Paraschiy: Loans from the IMF and other international partners are likely to be the main source of reserves accumulation in 2017. We project USD 19.5 bln (4.0 months of imports) in reserves by the year end, while the IMF projects USD 21.8 bln in 2017. The IMF assumes USD 5.5 bln in IMF loans and USD 1 bln in Eurobond placements. The Fund also assumes yet another EUR 0.6 bln wire from the EU by the year end.

We are skeptical about receiving USD 5.5 bln from the IMF in 2017, considering that every loan review in the EFF program took no less than half a year, in the best case scenario. Meanwhile, the groundwork for Eurobond placements (without U.S. guarantees) has not been laid.

To make matters worse, we also do not observe a revival in private investments: net FDI in 2M17 was negligible at USD 62 mln compared to USD 963 mln a year ago. Against this backdrop, any reserves target above USD 20 bln is at risk.