Ukraine’s international reserves continue to shrink slowly in September

Ukraine’s international reserves continue to shrink slowly in September
Ukraine’s international reserves fell to $16.6bn, below three months of import cover in September / bne IntelliNews
By bne IntelliNews October 8, 2018

Ukraine’s international reserves continue to slowly shrink as the government waits for the release of the next $1.9bn tranche from the International Monetary Fund (IMF).

International reserves dropped by 3.5% in September and as of October 1 amounted to $16.638bn, falling below the $17bn level for the first time since March 2017 and now well below the three months of import cover considered necessary to guarantee the stability of the currency, the National Bank of Ukraine (NBU) said on October 8. Now the available reserves cover 2.8 months of the future imports.

At the same time, the NBU said the specified amount is sufficient to fulfill the obligations of Ukraine and current operations of the government and the NBU.

Ukraine is running short of money as it has a total of some $3bn of obligations to meet through to the end of the year and another $7bn of debt to repay next year. It has been waiting on a resumption of its $17.5bn stand by facility with the IMF that has been de facto suspended because of the government’s foot dragging on reform. An IMF team was in Kyiv last month, but despite the widely anticipated conclusion of a new deal, no agreement was reached. The next tranche of $1.9bn was due in October, but now is unlikely to come before the end of the year. More money from the World Bank and EU is now stuck as its release is tied to a successful conclusion of a new deal with the IMF.

This autumn’s fall in reserves was due to payments for servicing and repaying state and state-guaranteed debt in foreign currency in the amount of $711.2mn. In particular, the costs for servicing eurobonds amounted to $562.3mn, government domestic loan bonds some $103.2mn. The government has been making active use of the local bond market where it offers dollar-denominated debt to local investors, in an effort to shore up its reserves. The state also issued a surprise and expensive short-term Eurobond worth $725mn in August.

In addition, in September the NBU sold $74.2mn in the interbank foreign exchange market to smooth out excessive fluctuations, including $34.1mn through interventions at the best price and $40.1mn through an auction.

Reserves were replenished by the funds from the placement of government domestic loan bonds for $48.6mn, buying $127.1mn in the interbank foreign exchange market through interventions to choose the best price, as well as revaluation of financial instruments in the amount of $13.5mn.

As reported, the National Bank of Ukraine in mid-July this year downgraded the forecast of international reserves at the end of 2018 to $20.7bn from $21.6bn.

Data

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