Ukraine gross foreign reserves increase 3.3% in June

Ukraine’s gross international reserves increased 3.3%, or USD 451 mln, to USD 14.0 bln in June, the National Bank of Ukraine (NBU) reported on July 6. The main factors were ForEx interventions of the NBU (USD 429.6 mln purchased on the market), as well as local Eurobond placements (USD 50.0 mln). Some part of the gross reserves funds was allocated on external debt servicing (USD 171.2 mln). By the end of June, gross international reserves reached 3.6 months of imports.

Alexander Paraschiy: The reserves’ dynamics are in line with our estimates. Positive developments in financial accounts, as well as a temporary C/A surplus, created an excessive supply of foreign cash at the ForEx, thus strengthening the hryvnia and enabling the NBU to stock away some funds. We expect this trend to continue till the end of the summer, while in the fall we anticipate a renewed swelling of the trade deficit on the back of strengthened natural gas imports. Still, expected funding from the IMF (at least USD 1.0 bln), USD 1 bln in loan guarantees from the U.S. government and a EUR 1.2 bln loan from the EU should allow further accumulation of gross reserves, regardless of the worsened C/A balance. By the end of 2016, we still expect gross reserves at USD 18 bln, which is 4.2 months of imports.