NBU reserves down to 2.8 months of imports as of end-November

The National Bank of Ukraine (NBU) said on Dec. 7 its gross international reserves fell 5.5% mom (USD 1.5 bln) to USD 25.4 bln in November (-20.3% YTD), bringing the October-November decline in reserves to USD 3.9 bln, 1.5x more than the preceding nine months.

Alexander Paraschiy: This further decline in gross reserves in November indicates the devaluation risk remains high: end-November reserves correspond to just 2.8 months of future imports. The news looks even more disappointing if we consider that November’s USD 1 bln IMF repayment, as well as the purchase of foreign currency by Kyiv city to repay its USD 250 mln Eurobond, were offset by a placement of USD 1.25 bln in sovereign Eurobonds. This time, a domestic speculative attack in early November affected the result. A major part of interventions (USD 1.66 bln) stemmed from net household demand (USD 1.52 bln), according to the NBU.  By the end of November, monetary authorities calmed the panic with a promise of 15% tax of foreign cash sales but the currency deficit is expected to remain due to continued fundamental economic hardships. We expect gross reserves to fall further through the year’s end to nearly USD 24.5 bln (vs. the previously expected USD 23.0 bln).