Ukraine gross NBU reserves increase 0.1% in March

Макроэкономика 08.04.2013 Gross international reserves of the National Bank of Ukraine (NBU) increased 0.1% (USD 16.9 mln) to USD 24.73 bln in March, according to NBU data released on Apr. 5. The reserves remained at a level of about 2.8 months of future imports. Alexander Paraschiy: New external borrowings, reduced natural gas imports and low individual cash demand were the main reasons for gross reserves stability in March. We anticipated gross foreign reserves would start sliding after some stability in 2M13. However, a high risk appetite globally, fueled by QE3, new private Eurobond placements and state bank borrowings (Oshadbank placed USD 500 mln, Ukreximbank placed USD 600 mln in 2013) helped to balance the ForEx market. What’s more, Ukrainian authorities reported a further decline in gas imports in February-March (to save more than USD 1 bln in import payments, as compared to 2012), which meant they used gas that had been accumulated in storage. Though gross ForEx reserves have demonstrated stability so far, the key factors are temporary, primarily hanging on QE3. In this respect, we still expect Ukraine’s weighty trade deficit putting pressure on the ForEx market, especially starting from the day when the government will start replenishing its storage tanks with new gas imports (May-June 2013). In light of these factors, we are keeping our forecast for gross reserves at USD 20.7 bln by the year’s end.