Ukraine gross foreign reserves inch up 0.1% in August

Ukraine’s gross international reserves remained almost unchanged (USD 14.1 bln) in August, increasing a mere 0.1% m/m (USD 21 mln), the National Bank of Ukraine (NBU) reported on Sept. 5. Local Eurobond placements (USD 368.3 mln) were the main source of foreign currency inflow. At the same time, USD 305.8 mln were spent on state and guaranteed debt, USD 54 mln on IMF debt servicing and a net amount of USD 13.4 mln on NBU currency market interventions. By the end of August, gross international reserves were enough to cover 3.6 months of imports. 

Alexander Paraschiy: Without IMF money, gross reserves will start shrinking quickly in line with an expanding current account deficit till the year end. Just in the first three business days of September, the NBU spent USD 110 mln on ForEx interventions, amid increased devaluation pressure. As Ukrainian and IMF officials recently suggested, Ukraine is very likely to receive a third tranche this month, with scheduling of the respective IMF board meeting to occur in the nearest days. This will help both replenishing gross reserves and calming down the ForEx market.

So far, we assume an IMF loan will arrive soon (USD 0.7-1.0 bln), which will open the way to getting USD 1.0 bln in Eurobond guarantees from the U.S. government and at least half of the EUR 1.2 bln in agreed upon loans from the EU. Taking this into account, we expect Ukraine’s gross reserves may reach USD 17 bln as of end-2016.