Ukraine gross reserves jump 12% in June

Ukraine’s gross international reserves jumped 12.4% m/m
(or by USD 3.1 bln) to USD 28.5 bln in June after declining 1.3% m/m in May,
the National Bank of Ukraine (NBU) reported on July 7. The surge was the result
of the release of the first tranche of an 18-month Stand-by Arrangement loan
program with the IMF and the purchase of foreign currency by the NBU at
Ukraine’s Forex.

The first IMF tranche amounted to USD 2.1 bln,
which was enhanced by connected lending from the European Union of EUR 0.5 bln.
The government also drew USD 353 mln from the placement of local Eurobonds
during the month.

At the same time, USD 1,074 mln in local Eurobonds and
USD 76 mln in international Eurobonds were redeemed and serviced. The rest of
the payments, or USD 85 mln, involved obligations to the IMF and other
international creditors and financial institutions.

The NBU did not sell foreign currency at Ukraine’s
Forex market during the month, while its purchase of foreign currency at the
market amounted to USD 1,155 mln.  The NBU also reported a USD 153 mln
rise in the value of its securities portfolio.

As of July 1, Ukraine’s gross reserves amounted to 4.8
months of imports, the NBU said.

Evgeniya Akhtyrko: As we expected, the release
of the IMF funding, coupled with related E.U. loans, was the major driver of
gross international reserves growth in June. In addition, the NBU intensified
the purchase of foreign currency at Ukraine’s ForEx, where foreign currency
supply significantly exceeded demand during the month.

The major foreign currency outlay in July will involve
the redemption and servicing of local Eurobonds of USD 757 mln. However, this
expense is likely to be fully or partially compensated by the receipts from the
placement of new 1Y local Eurobonds, which are planned for July 14 and July 28.

If the situation at Ukraine’s ForEx doesn’t
deteriorate significantly, thereby prompting the NBU to sell some of its
reserves during the month, Ukraine’s gross international reserves are not
likely to change significantly in July.