Ukraine gross reserves decline 0.6% in May

Ukraine’s gross international reserves declined by USD
0.16 bln, or 0.6%, to USD 27.84 bln in May 2021, the National Bank of Ukraine
(NBU) reported on June 7. The decline was due to the government’s repayments on
foreign and domestic debt.

In May, total government payments on the redemption
and servicing of state debt in foreign currency amounted to USD 651 mln (in the
equivalent). In particular, USD 529 mln was directed to the redemption and
servicing of local Eurobonds. Payments to the IMF amounted to USD 64 mln. At
the same time, the foreign currency inflow to the government’s accounts
amounted to 418 mln in May, including USD 354 mln in receipts from placements
of local Eurobonds.

The NBU reported a USD 137 mln increase in the value
of its securities portfolio.

As of June 1, Ukraine’s gross reserves amounted to 4.2
months of imports, the NBU said.

Evgeniya Akhtyrko: We were
close in our estimate of the
international reserves’ decline in May. As we expected, the government was not
able to compensate for the outlays related to the redemption of local bonds by
the receipts from the new placement amid quite a weak primary local bond
market.

Ukraine has no scheduled payments to the IMF until
Aug. 1. The major outlay in foreign currency in June is the redemption of local
Eurobond for USD 806 mln on June 4. In addition, the country is to pay EUR 67.5
mln coupon on 2026 international Eurobonds. Given quite a weak local bond
market, we expect the new receipts from the local Eurobonds during the month to
compensate for only about half of the government’s outlays on the redemption of
local bonds. However, amid the recent trend of intensified revaluation of the
national currency, the NBU is likely to renew the purchase of foreign currency
on the local ForEx market. With these ins and outs, the decline of Ukraine’s
international reserves in June is not likely to exceed 1%.