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due to the change in the country’s industrial balance due to the war, the removal of trade restrictions by the EU, and favorable price conditions for the EU and Ukraine.
5.2.2 Gross international reserves
Ukraine's international reserves increased by $1.315bn, or 5.5%, in October bringing the total to $25.2bn, UBN reported on November 9.
Cut off form the international capital markets and facing economic hardship caused by not only the war, but the polycrisis that has hit the global economy, Ukraine has been struggling to maintain enough reserves to ensure the stability of the national currency and the functioning of the economy.
The National Bank of Ukraine (NBU) has reportedly spent some $20bn this year supporting the currency, much of it funded by grants and loans from Ukraine’s international partners.
Since the beginning of the year, reserves have decreased by $5.7bn (18.4%), the NBU reports. (chart)
In September Ukraine’s partners increased their commitment to support Kyiv financially next year with both the US and the EU separately committing to $18bn of funding each. The government has been running a $5bn a month deficit that has largely been covered by printing cash, but the new international financial aid package goes a long way to covering the anticipated $38bn deficit expected in 2023.
Reserves increased in October due to steady inflows from international partners as this support package begins to arrive. The promise of more money has also shored up the hryvnia and lead to a decrease in the net sale of currency by the National Bank.
International donors sent a total of $4.2bn of financial aid in October, of which $1.9bn was from the EU, $1.3bn was from the International Monetary Fund (IMF), $498.8mn was from the World Bank, and $424.8mn was from the placement of hryvnia-denominated state treasury bonds (OVDP) sold to foreign investors via the local bond market.
The NBU has sharply improved its international reserves forecast for the end of the year by $5.2bn to $26bn, which is well over the requisite three months of import cover. At the same time, the forecast for 2023 predicts that reserves will decrease to $21.7bn.
Financial support for Ukraine is not uniform amongst the EU members. Hungary has refused to contribute to the EU’s €18bn macro-assistance package of funding in the New Year, according to comments by the Minister of Foreign Affairs of Hungary, Peter Szijjártó.
"We are ready to continue financial support based on a bilateral agreement between Ukraine and Hungary, but we will not support any joint borrowing by the EU," the minister said, as cited by UBN.
Szijjártó‘s statement was made after the head of the European Commission,
33 UKRAINE Country Report December 2022 www.intellinews.com