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5.2.2 Gross international reserves
Ukraine’s international reserves stayed unchanged at $20.8bn in January, the National Bank of Ukraine (NBU) reported on February 6.
Foreign currency outlays related to net debt repayments were compensated by foreign currency purchases by the regulator. The NBU reported that government payments in foreign currency on debt repayment and servicing amounted to $883.9mn (in the equivalent), including $808.1mn on the redemption and servicing of local Eurobonds. These outlays were partially compensated by new local Eurobond placements for $620.7mn.
International reserves during January were replenished through the purchase of foreign currency by the NBU at Ukraine’s FX exchange. The net purchase of foreign currency amounted to $136.1mn. The NBU also reported on the increased value of its security portfolio by $126.3mn (adjusted to market value and exchange rate).
Ukraine’s gross reserves amounted to 3.4 months of imports as of early February.
"The relatively stable situation at the FX helped the NBU to compensate currency outlays related to debt redemption despite its difficulties in attracting new local debt in foreign currency during the month," Evgeniya Akhtyrko at Kyiv-based brokerage Concorde Capital wrote in a note on February 7.
In February, Ukraine’s government will face high debt repayments in foreign currency. It will have to repay around $440mn to the International Monetary Fund (IMF) and $745mn to the holders of local Eurobonds.
These outlays will be partially compensated by expected inflows of $600mn from international borrowing in February that will be secured by a guarantee of the World Bank, as reported by the finance ministry, Akhtyrko added.
At the same time, the foreign currency inflows from the new placements of local Eurobonds are not likely to be essential, as the latest local bond placement revealed the low capacity of local market players to generate foreign currency inflow through the purchase of local Eurobonds, the expert believes.
February’s level of reserves will largely depend on the amount of foreign currency the NBU will buy at ForEx during the month. The current appreciation of the UAH/USD exchange rate (2.7% YTD) gives the central bank a solid opportunity to replenish its reserves this way, Akhtyrko added.
Concorde expects the balance of foreign currency flows in February will be negative, and gross reserves are likely to lose $100mn-$200mn.
36 UKRAINE Country Report March 2019 www.intellinews.com