NBU reserves fall 4.7% in June

The National Bank of Ukraine’s reserves declined 4.7% mom (USD 1.4 bln) to USD 29.3 bln in June, according to NBU data from Friday. The central bank sold net USD 0.7 bln last month to support hryvnya stability.

Vitaliy Vavryshchuk: Although the government spent net USD 1.7 bln to repay principal (USD 1.0 bln in VTB loan and USD 0.5 bln Eurobond) and service debt last month, the substantial fall in NBU reserves is still a negative surprise. Our key concern is the need for the sizable net USD 0.7 bln in interventions in June, as we expected the local currency market would have stayed nearly balanced. Naftogaz received a USD 2.0 bln advance payment from Gazprom in June and did not have to buy dollars on the market to pay Gazprom. Additionally, the inflow of currency related to Euro-2012 should also have eased pressure in the FX market. We still stick to our projection that the NBU will have to spend about 6.0 bln of its reserves (net USD 1.3 bln spent in 1H12) to keep the hryvnya relatively stable in 2012. While June data was below our expectation, the recent news of Naftogaz drawing a USD 2.0 bln loan from Gazprombank is extremely positive and largely discards our concerns related to weak June stats. We leave our projection for end-2012 NBU reserves unchanged at USD 23.1 bln (-27% yoy).