Ukraine gross reserves increase 3% in April

Ukraine’s gross international reserves increased 3.1%
m/m to USD 25.7 bln in April after dropping 7.8% m/m in March, the National
Bank of Ukraine (NBU) reported on May 7. The growth was mostly due to the NBU’s
purchase of foreign currency at Ukraine’s forex market. The net purchase of
foreign currency by the NBU in April amounted to USD 679 mln (vs. USD 2.2 bln
in net sales in March). The central bank noted that demand for foreign currency
declined in April after panic-buying in the prior month.

In April, the redemption and servicing of foreign
currency debt required USD 304 mln (in the equivalent). In particular, payments
on local and international Eurobonds amounted to USD 127 mln and USD 78 mln
respectively. The rest of the payments involved obligations to other
international creditors and financial institutions. These outlays were
partially compensated by receipts from the placement of local Eurobonds for USD
164 mln.

The NBU also reported a USD 232 mln rise in the value
of its securities portfolio. As of May 1, Ukraine’s gross reserves amounted to
4.5 months of imports, the NBU said.

Evgeniya Akhtyrko: The
intensified purchase of foreign currency by the NBU, which resulted in reserves
growth,  was in line with our forecast. The clean
up of the banking system, fiscal consolidation, and the transition floating exchange
rate – all of which were undertaken after 2014 – helped to withstand the
initial crisis shock effectively and to avoid the dramatic loss of reserves and
depreciation of the national currency, which were typical for previous crisis
episodes in Ukraine.

In May, Ukraine’s outlays in foreign currency will be
high. They will include the redemption and servicing of U.S.-guaranteed
Eurobonds of USD 1,009 mln, the redemption and servicing of local Eurobonds of
USD 334 mln and repayments to the IMF of about USD 320 mln. These outlays are
likely to be partially compensated by the purchase of foreign currency by the
NBU. With all the ins and outs, reserves are likely to lose around 3% in
May.