Ukraine gross reserves increase 2% in June

Ukraine’s gross
international reserves increased by USD 0.52 bln, or 1.9%, to USD 28.36 bln in
June, the National Bank of Ukraine (NBU) reported on July 6. The new government borrowing in
foreign currency, coupled with the NBU’s interventions at Ukraine’s ForEx
market, compensated for the government’s payments on foreign and domestic debt.

In June, the foreign
currency inflow to the government’s accounts amounted to USD 1.1 bln (in the
equivalent). In particular, receipts from placements of local Eurobonds
amounted to USD 726 mln. At the same time, total government payments on the
redemption and servicing of state debt in foreign currency amounted to USD 996
mln, of which USD 848 mln was directed to the redemption and servicing of
local Eurobonds and USD 80 mln went to payments for servicing international Eurobonds.
Payments to the IMF amounted to USD 2 mln.

The net purchase of
foreign currency by the NBU at ForEx market amounted to USD 583 mln in June.

The NBU also
reported a USD 181 mln decline in the value of its securities portfolio.

As of July 1, Ukraine’s
gross reserves amounted to 4.3 months of imports, the NBU said.

Evgeniya Akhtyrko: An incredibly favorable situation
at Ukraine’s ForEx market prompted the NBU to renew the purchase of foreign
currency. By and large, an additional currency inflow at the market was
generated by the purchase of UAH denominated local bonds by nonresident
investors. In particular, the volume of local bonds in portfolios of
non-resident investors increased by around USD 450 mln in June.

The major outlay in foreign currency in July is the redemption of local Eurobonds for USD 350
mln on July 29. MinFin is likely to compensate for this outlay with receipts
from new placements of local Eurobonds during the month. We expect the activity
of nonresident investors at UAH debt market to weaken in July. Therefore, the
NBU’s ForEx interventions are likely to lessen as well. The most likely case is
that the NBU’s international reserves will stay flat in July.