Page 30 - UKRRptSept18

of future imports that ensure the stability of the local currency.
“Ukraine’s gross reserves have now declined to the minimum accepted “safe level” of three months of imports. With foreign currency supply on the foreign currency exchange dwindling in the last two months, the NBU has lost the ability to replenish reserves through currency purchases. At the same time, demand for local Eurobonds has declined in recent weeks,” Evgeniya Akhtyrko of Concorde Capital said in a note.
“We are likely to see further losses in gross international reserves in August due to relatively high payments on foreign debt. In particular, this includes an IMF repayment of about $600mn, as well as repaying and servicing local Eurobonds worth $384mn. We expect the government will make an effort to raise more foreign currency with the sale of local Eurobonds this month. However, this alone won't compensate the debt repayments,” Akhtyrko added.
“With its worsening ability to raise foreign currency, we expect Ukraine’s gross reserves will fall around $400mn during August to well below the “safe level” of three months of imports. This will trigger a downward spiral, as the continuously declining reserves will harm Ukraine's prospect on the global debt markets. The main factor that can stop this spiral is an IMF loan tranche, which is critical for bringing Ukraine's gross reserves back above the "safe level" and restoring foreign borrowing,” Akhtyrko concluded.
30 UKRAINE Country Report September 2018 www.intellinews.com