Ukraine gross reserves decline 1% in May

Ukraine’s gross international reserves declined 1.3%
m/m to USD 25.4 bln in May after increasing 3.1% m/m in April,
the National Bank of Ukraine (NBU) reported on June 5. The decline was mostly
due to significant redemptions of state foreign debt.

In May, the redemption and servicing of foreign
currency debt required USD 1.5 bln (in the equivalent). In particular, the
redemption and servicing of international and local Eurobonds amounted to USD
1,009 mln and USD 338 mln, respectively. The rest of the payments involved
obligations to the IMF and other international creditors and financial
institutions. These outlays were partially compensated by receipts of USD 419
mln, including the placement of local Eurobonds for USD 369 mln.

The NBU did not sell foreign currency at Ukraine’s
Forex market during the month, while its purchase of foreign currency at the
market amounted to USD 661 mln.  The NBU also reported a USD 73 mln rise
in the value of its securities portfolio.

As of June 1, Ukraine’s gross reserves amounted to 4.4
months of imports, the NBU said.

Evgeniya Akhtyrko: A favorable
situation at the foreign currency market, coupled with the revival of the local
bond market, helped the NBU to get through the period of increased foreign debt
repayments without significant losses in reserves.

We are likely to see a significant jump in Ukraine’s
gross international reserves in June. We expect the IMF’s approval of
Ukraine’s request for a Stand-by Arrangement will result in the
disbursement of USD 1.8-1.9 bln during the month. This payment is likely to be
followed by an E.U. loan of EUR 0.5 bln.

The major foreign currency outlay in June will involve
the redemption of short-term local Eurobonds of USD 807 mln. However, this
expense is likely to be fully or partially compensated by the receipts from the
placement of new local Eurobonds, as well as by the NBU’s purchases of foreign
currency at Ukraine’s Forex.