Ukraine gross reserves drop 1.6% in May

Ukraine’s gross international reserves declined 1.6% m/m,
or USD 302 mln, to USD 18.1 bln in May, the National Bank of Ukraine (NBU)
reported on June 5. The losses were due to FCY-denominated debt repayments that
exceeded receipts from a local Eurobond placement and net currency purchases by
the central bank on the ForEx.

In May, debt repayment to the IMF totaled USD 455 mln
(in equivalent). Besides, USD 126 mln were channeled to the repayment and
servicing of local Eurobonds while international Eurobond servicing demanded
USD 18.5 mln.

At the same time, the local Eurobond placement
restocked reserves by USD 272 mln and EUR 65 mln. The net purchase of currency
via the interventions “at the best exchange rate” during the month amounted to
USD 181 mln and contributed to reserves replenishment.

The NBU also reported on a securities revaluation of
USD 162.3 mln (adjustment to market value and currency exchange rate), which
apparently had a negative effect on reserves.

Evgeniya Akhtyrko: May’s drop
in reserves was very close to our projection.
A lesser-than-expected currency purchase on the ForEx was compensated by
receipts from the local Eurobond placement.

In June, Ukraine will encounter difficulty with
maintaining international reserves, given increased payments on FCY-denominated
debt (around USD 166 mln to the IMF and USD 546 mln on a local Eurobond
redemption and coupon payment).

To avoid reserves losses, this outflow might be
compensated by receipts from a local bond placement (around USD 500 mln) and a
currency purchase on the ForEx (around USD 200 mln). Most probably,
international reserves in June will be close to the level of the previous
month.