Ukraine gross reserves rise 6% in July

Ukraine’s gross international reserves rose 5.8% m/m,
or USD 1.2 bln, to USD 21.8 bln in July after increasing 6.4% m/m in the previous month,
the National Bank of Ukraine (NBU) reported on Aug. 6. The result was driven by
record-high foreign currency purchases by the central bank on ForEx market,
coupled with receipts from the placement of local bonds, exceeding government
outlays in foreign currency during the month.

The favorable situation on Ukraine’s ForEx enabled the
central bank to boost its foreign currency purchases to USD 1.27 bln in July
from USD 0.32 bln in the previous month. In addition, receipts from the
placement of local Eurobonds – amounting to USD 1.0 bln – were almost
completely compensated by government outlays related to the redemption and
servicing of foreign currency debt.

The central bank also reported a decline in the value
of its securities portfolio of USD 57 mln (adjusted to market value and the
currency exchange rate).

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

Evgeniya Akhtyrko: The central
bank benefited greatly from the abundant foreign currency supply in Ukraine’s
ForEx in July. The volume of foreign currency purchases by the central bank
exceeded all expectations. At the same time, the market participants
intensified the purchase of local Eurobonds, taking advantage of the
opportunity before MinFin takes an expected break in offering local debt
denominated in foreign currencies.

This month is going to be relatively easy in terms of
payments in foreign currency. Ukraine is to repay around USD 190 mln to the IMF
and to redeem local Eurobonds for USD 124 mln. MinFin has no plans in placing
local Eurobonds in August, so these outlays are likely to be partially or fully
compensated by the NBU’s purchase of foreign currency on the ForEx.