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EU-FINSTAR
(Technical Assistance in Financial Sector's Priority Areas, Ukraine)

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Project Beneficiaries:
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Ministry of Finance

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Financial Market News

In 2018, Ukraine’s International Reserves Reached a Five-Year High
08 January, 14:35

In 2018, Ukraine’s International Reserves Reached a Five-Year High

In 2018, international reserves rose by 10.6% and as of 1 January 2019 amounted to USD 20.8 billion (in the equivalent), according to the preliminary estimate. This amount of reserves not only exceeded the latest NBU forecast (USD 19.2 billion in the equivalent, according to the October 2018 Inflation Report), but also reached a five-year high. Last time the international reserves reached this level in October 2013.

The increase in international reserves was first of all due to foreign financing and the purchase of a FX surplus by the NBU on the interbank market.

Thus, over most of the year the supply of FX in the interbank market exceeded its demand. In particular, in H1, a high level of supply was provided by a favorable external price environment for Ukrainian export goods and an increase in the interest of international investors in emerging markets. In H2, the surplus of currency in the interbank market was primarily due to the proceeds from the export of a record harvest of cereals and other agricultural products.

In addition, the supply of FX from banks was affected by net sales of FX by the households. Thus, the NBU was able to make a net purchase of FX worth USD 1.4 billion without affecting the hryvnia exchange rate.

The disbursements from the International Monetary Fund, the European Union and the World Bank in support of macro-financial stability and reforms in Ukraine amounted to USD 2.4 billion. In addition, last year the Government attracted USD 6.1 billion in foreign and domestic markets. At the same time during the year, the reserve funds were used on government and NBU spending for servicing and repayment of the public debt denominated in foreign exchange. Their total amount was USD 8.1 billion.

An increase in the value of financial instruments (changes of market value, and of hryvnia exchange rate to foreign currencies) in the amount of USD 230 million also contributed to reserves increase.

In particular, during December international reserves increased by USD 3,108 million or 17.5% to USD 20,820.4 million due to a number of factors:

●      Ukraine received USD 2,396.8 million of international official funding. Under new Stand-By Arrangement Ukraine received first tranche in the amount of USD 1,391.1 million (in the equivalent). The related funding, namely, the disbursements from the World Bank and the European Union, amounted to USD 1,005.7 million (in the equivalent).

●      The government received USD 540.8 million from the sale of domestic government bonds denominated in foreign currency.

Other government payments to service and repay public debt denominated in foreign currency amounted to the equivalent of USD 156.4 million, including USD 142.2 million - with domestic government bonds. At the same time, the government and the National Bank of Ukraine paid the equivalent of USD 158.2 million to the International Monetary Fund in December.

●      In December, the NBU’s net FX purchases in the interbank market increased the reserves by USD 338.5 million.

In particular, the NBU purchased USD 519.0 million, including USD 135.4 million through foreign exchange interventions at the best price and USD 383.6 million - at a single exchange rate.

At the same time, the NBU sold USD 180.5 million, including: USD 60.0 million at the best price and USD 120.5 million at a single exchange rate.

●      Additionally, the value of financial instruments increased by USD 147.0 million (as a result of changes in the market value, and in the hryvnia exchange rate to foreign currencies), affecting the amount of the international reserves.

Overall, as of 1 January 2019, the international reserves covered 3,5 months of future imports and were sufficient for Ukraine to meet its obligations and for the government and the NBU to conduct their current transactions. At the same time, to maintain macro-financial stability in Ukraine it is important to further cooperate with the International Monetary Fund and implement a prudential monetary and fiscal policy.

Data on the international reserves and foreign currency liquidity are compiled and distributed on a monthly basis:

●      no later than on the seventh day following the reporting month – for preliminary data

●      and revised data, compiled and distributed no later than the twenty-first day following the reporting month.

bank.gov.ua

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