Ukraine reserves drop 13% m/m in February

Ukraine’s gross international reserves plunged USD 2.3 bln to USD 15.6 bln in February (1.8 months of future imports), according to National Bank of Ukraine (NBU) data released on March 6.

Alexander Paraschiy: The key factors in the reserves decline were the repayment of Naftogaz debt to Gazprom (USD 1.68 bln, according to former Energy Minister Eduard Stavytskiy) and a USD 376 mln payment to the IMF. The armed conflicts should have also provoked currency outflow from the banking system. The hryvnia’s devaluation should have also caused consumer imports to fall (trade data for February is not available yet).

We expect the decline in reserves slowing after the NBU stated openly it won’t intervene in the hryvnia devaluation. USD 188 mln is due to the IMF in March but already Ukraine has considerable commitments from the West on loans and grants. Against this backdrop, we project positive gross foreign reserves dynamics towards USD 20 bln by December (depending on the size of the IMF loan).