Ukraine gross reserves drop 2% to USD 18.4 bln in January

Ukraine’s gross international reserves dropped 2% m/m,
or USD 366 mln, to USD 18.4 bln owing to debt repayment and currency
interventions on the interbank market, the National Bank of Ukraine (NBU)
reported on Feb. 6. FCY-denominated debt repayment and servicing totaled USD
565.6 mln, including USD 468.5 mln in payments on local Eurobonds.

During the last days of January, the NBU managed to
benefit from the improved situation on the ForEx by buying back most of the
currency amount injected into the market throughout the period of high volatility
that lasted for most of the month. The net sale of currency during the month
amounted to USD 15.9 mln (USD 266.8 mln in currency sales reduced by USD 250.9
mln in currency purchases) contributed to January’s decline in NBU reserves.

The NBU also reported on a securities revaluation at
USD 205.9 mln (adjustment to market value and currency exchange rate) and
“other operations” at USD 9.9 mln, which apparently helped to avoid a larger
drop in reserves caused by debt repayment.

By the end of January, gross international reserves
covered 3.5 months of future imports.

Evgeniya Akhtyrko: January’s
drop in gross international reserves was exactly in line with our projections. We expect
the decline in reserves to last throughout  February as well. Since the
beginning of the month, Ukraine has already spent around USD 432 mln on IMF
debt repayment and servicing. At the same time, no issue of foreign
currency-denominated bonds is scheduled for February.

To compensate for the currency outflow, the NBU is
likely to be very active in buying hard currency on ForEx, benefiting from an
ongoing local currency revaluation and lowered currency demand on the market.
Given this factor, we estimate that the country’s international reserves will
decline 0.5% in February.