Ukraine reserves flat vs. August despite Russian loan
8 October 2013
Ukraine’s gross international reserves were almost unchanged in September at USD 21.64 bln (USD 21.65 bln a month ago), according to National Bank of Ukraine (NBU) data released on October 7. During the month, the government attracted USD 882 mln in new loans, and spent USD 475 mln to cover state and guaranteed debt. On top of that, the NBU spent USD 582 mln in foreign currency reserves for interventions, according to the report.
Alexander Paraschiy: The figures are disappointing being flat m/m. If not for a USD 750 mln loan from Russian Sberbank, we would have seen gross reserves below the USD 21 bln mark by now.
Over the next months, we anticipate gross reserves will decline further. In October, Ukraine has to pay back USD 640 mln to the IMF and state monopoly Naftogaz needs to return nearly USD 400 mln to VTB Capital. We will most likely see reserves decline to below USD 20 bln already in October if we add ForEx interventions by the NBU to support the hryvnia at a level stronger than UAH 8.2/USD (which cost USD 0.6 bln in September) and if little demand remains for USD-denominated local government bonds.
In November, external debt repayments also will be at least USD 1.0 bln. So even excluding expectedly higher natural gas imports and elevated demand for U.S. dollars, we expect foreign gross reserves may fall below the USD 18 bln level till the year end. All in all, we see the pressure on the local currency will be enormous in the next two months and we see a high risk of noticeable (5% or higher) hryvnia devaluation
