Ukraine gross foreign reserves fall USD 0.8 bln in March

Ukraine’s gross international reserves fell 5.7%, or USD 768 mln, to USD 12.7 bln in March, the National Bank of Ukraine (NBU) reported on April 5. The main factors were external debt servicing, as well as swap operations. In particular, Ukraine paid USD 473.3 mln in coupons on Eurobonds, returned USD 436.0 mln on swap operations and wired USD 11.4 mln to the IMF. The NBU spent only USD 2.1 mln net on ForEx interventions. The main inflow was a USD 334 mln loan from the Japan International Cooperation Agency. By the end of March, gross international reserves equaled 3.4 months of imports. 

Alexander Paraschiy: The political crisis has taken its toll on financial inflows to the country. Initially, Ukraine was supposed to receive an IMF tranche of at least USD 1.7 bln and USD 1.0 bln in guarantees on Eurobonds from the U.S. government by the end of 1Q16. However, the corruption scandal that started in early February and is still ongoing effectively blocked funding from abroad. The problem should be resolved soon with a new parliamentary coalition, which will renew IMF funding and enable gross reserves to grow to USD 18 bln in 2016. However, we cannot rule out a prolonged period of political uncertainty in which the lame duck Cabinet remains intact until autumn, when early parliamentary elections would be held. In which case, gross reserves will keep falling to the USD 10 bln mark.