Ukraine gross reserves increase 2.5% in November

Ukraine’s gross international reserves increased 2.5%
m/m to USD 21.9 bln in November, the National Bank of Ukraine (NBU) reported on
Dec. 6. The NBU’s purchase of foreign currency at the ForEx during the month
significantly exceeded repayments and servicing of state debt in foreign
currency.

The total outlays on repaying and servicing state debt
in foreign currency in November totaled the equivalent of USD 645 mln. Out of
this amount, EUR 426 mln was spent on local Eurobonds and USD 9.2 mln on
international Eurobonds. Ukraine’s payments to the IMF amounted to USD 84 mln.
This spending was partially compensated by receipts from the placement of local
Eurobonds of USD 305 mln.

Due to a favorable situation at Ukraine’s ForEx, where
foreign currency supply exceeded demand, the central bank intensified its
purchases, which replenished Ukraine’s gross reserves by USD 898 mln. At the
same time, the central bank reported a decline in the value of its securities
portfolio by USD 29 mln (adjusted to market value and the currency exchange
rate).

As of Dec. 1, Ukraine’s gross reserves amounted to 3.4
months of imports, the NBU said.

Evgeniya Akhtyrko: The NBU
benefited from an extremely favorable situation at Ukraine’s ForEx, boosting
its purchases of foreign currency to record highs. These operations, coupled
with additional placements of local Eurobonds, imply that government institutions
used market opportunities to the maximum in picking up as much foreign currency
as possible, with the outcome of Ukraine-IMF talks on a new loan program
remained vague.

The volume of Ukraine’s gross reserves at end-2019
will largely depend on the amount of foreign currency purchased by the NBU at
the ForEx in the remaining weeks. The continuing appreciation of the national
currency is concerning Ukraine’s exporters, which creates more reasons for
Ukraine’s central bank to be an active participant at the ForEx. It’s very
likely that the NBU’s interventions at the currency market will enable boosting
gross reserves by 2-3% in December.