Ukraine’s international reserves in 2019 increased by 22% and amounted to $25.3 billion as of January 1, 2020, the National Bank of Ukraine (NBU) said on its website.
“This amount of reserves not only exceeded the latest forecast of the National Bank ($23 billion in equivalent, according to the Inflation Report for October 2019), but also reached a seven-year high: the last time a greater volume was recorded back in December 2012,” the NBU said.
At the same time, the release states that the National Bank managed to increase international reserves in general by $4.5 billion per year due to the continued favorable situation in the foreign exchange market, which is due to a further acceleration of economic growth and a steady influx of foreign capital into the country.
The NBU notes that the buildup of international reserves occurred in the year of double elections and peak payments on external public debt, which is an additional evidence of the strengthening of macro-financial stability in the country.
During 2019, the supply of currency in the interbank market significantly exceeded the demand. A high level of supply was provided by Ukrainian exporting companies, primarily farmers, who, despite a slight deterioration in the terms of trade in the world markets, increased sales, as well as foreign investors who sold $4.3 billion to buy hryvnia-denominated government bonds. External financing was actively attracted by state and private companies. At the same time, importers’ demand for foreign currency was moderate, in particular due to lower world energy prices. The volume of repatriation of business dividends abroad was also smaller, the report said.
According to the release, over the year, the National Bank’s net purchase of foreign currency amounted to $7.9 billion, which is the highest figure in the last 14 years.
Active currency sales by the private economic sector, state-owned companies, as well as foreign investors allowed the NBU to replenish international reserves in December by $2.933 billion (net purchase of foreign currency). In particular, $1.743 billion was bought at a single rate, $510 million – by choosing the best rate and $730 million – at auction. At the same time, in order to smooth out fluctuations towards the depreciation of the hryvnia, the NBU in December sold $50 million at a single rate during one trading day.
According to the report, in December, $220.3 million was sent for servicing and repaying the state debt in foreign currency, including $181.3 million paid on government domestic loan bonds. These expenses were offset by revenues of $514 million, including $259 million and EUR 198 million from the placement of government bonds denominated in foreign currency.
The size of international reserves was also affected by the revaluation of financial tools (changes in the market value and the hryvnia exchange rate against foreign currencies). Last month their value increased by $143.6 million.
At the same time, the regulator said that the current volume of international reserves covers 3.9 months of Current External Payments (CXP) and is sufficient to meet Ukraine’s obligations and current operations of the government and the NBU.
