Ukraine gross reserves decline 5.5% in May

Ukraine’s gross international reserves declined 5.5%
m/m, or USD 1.1 bln, to USD 19.4 bln in May after rising 2.0% m/m in the
previous month, the National Bank of Ukraine (NBU) reported on June 6. Payments
related to FCY-denominated debt exceeded receipts from the new debt placement
and foreign currency purchases by the central bank on Ukraine’s ForEx.

In May, the government spent USD 1.8 bln (in the
equivalent) on repaying and servicing debt in foreign currency. In particular,
the redemption and servicing of international Eurobonds required USD 1.3 bln.
In addition, USD 447 mln (in the equivalent) was spent on redeeming and
servicing local Eurobonds. The rest included debt repayments to international
organizations.

These outlays were partially compensated by receipts
from the placement of local Eurobonds for USD 428 mln and World Bank financing
of USD 10 mln. In addition, the net purchase of foreign currency by the central
bank amounted to USD 161 mln. The National Bank reported an increase in the
value of its securities portfolio of USD 81 mln (adjusted to market value and
the currency exchange rate).

As of June 1, Ukraine’s gross reserves amounted to 3.2
months of imports, the NBU said.

Evgeniya Akhtyrko: May’s gross
reserves decline was close to our expectations.
The increased volatility at Ukraine’s ForEx prevented the NBU from buying more
foreign currency for replenishing reserves.

In June, Ukraine is to redeem local Eurobonds for
USD 489 mln and EUR 250 mln. In addition, a payment of about USD 160 mln is
scheduled for the IMF. These outlays will be partially compensated by the
placement of new local Eurobonds and the purchase of foreign currency by the
central bank on the ForEx. Most likely, this inflow will not fully compensate
foreign currency outflow during the month. We expect gross international
reserves to lose USD 0.2-0.3 bln in June, unless Ukraine successfully places
its new Eurobond.