Ukraine’s gross international reserves increased 4.1%, or USD 519 mln, in April to USD 13.2 bln, the National Bank of Ukraine (NBU) reported on May 6. The main factors were purchases of foreign cash on the ForEx (as the NBU purchased USD 676 mln net in April), as well as a local Eurobonds placement of USD 651 mln. Remarkably, the NBU returned USD 762 mln on a swap operation in April and spent USD 114.0 mln from gross reserves on debt servicing. By the end of April, gross international reserves equaled to 3.4 months of imports.
Alexander Paraschiy: External accounts benefitted from a recovery in global resource prices and political stability in Ukraine related to the appointment of new Cabinet in April. It’s difficult to say whether it’s exports that generated positive cash flow or whether it came mainly from financial accounts. However, April’s hryvnia appreciation and NBU interventions leave no doubt that there’s an excess supply of foreign cash at the ForEx market for the moment. As we discussed earlier, this positive trend looks temporary in light of a fast revival in non-energy imports that occurred in February and March.
Against this backdrop, an acceleration in the C/A deficit looks inevitable in the upcoming months with a subsequent return of depreciation pressure on Ukrainian currency. Still, we see a good chance for gross international reserves increasing throughout the year on the back of international support. The appointment of a new Cabinet gives the green light for resuming cooperation with the IMF and other donors, but authorities still have their work cut out for them as 19 bills still need approval to receive the next IMF tranches, according to presidential authorities. Should they arrive, Ukraine’s gross international reserves have all the chances to reach USD 18 bln by the year end.