Ukraine gross reserves increase 0.6% in October

Ukraine’s gross international reserves increased 0.6%
m/m, or USD 0.1 bln, to USD 16.73 bln in October owing to a foreign currency
purchase by the central bank on the ForEx, the National Bank of Ukraine (NBU)
reported on Nov. 5. Ukraine’ s reserves grew for the first time after declining
for five straight months.

In October, the net foreign currency purchase on the
ForEx by the NBU amounted to USD 198.5 mln. In addition, government receipts
from the sale of local Eurobonds of USD 790.7 (in the equivalent) almost
covered outlays related to a local Eurobond redemption and debt servicing
during the month (USD 853.0 mln in the equivalent).

At the same time, the NBU reported on a securities
revaluation of USD 36.8 mln (adjusted to market value and the currency exchange
rate), which had a negative effect on reserves.

As of Nov. 1, Ukraine’s gross reserves amounted to 2.8
months of imports.

Importantly, the October reserves did not include
receipts from the placement of international Eurobonds on Oct. 25
for USD 2.0 bln. To reflect this inflow, the NBU reported that gross reserves
reached USD 18.1 bln (or 3.0 months of imports) as of Nov. 5.

Evgeniya Akhtyrko: To avoid
reserves losses in October, the government resorted to sharp interest rate hikes for local Eurobonds
in order to maintain the interest of local market players.

At the end of November, Ukraine’s reserves are likely
to be close to the amount reported by the NBU as of Nov. 5 – USD 18.1 bln. This
amount already accounts for November payments to the IMF of around USD 450 mln.

Meanwhile, an expected payment to redeem local
Eurobonds for USD 132.8 mln this month is likely to be compensated by a new
round of placements of local Eurobonds also this month.