Ukraine’s foreign reserves shrunk to an unexpected $18.8 billion in November, $400 million more than market forecasts, suggesting capital flight was underway amid a growing appetite for U.S. dollars, analysts said.
Reserves
continued so far to contract at the same pace this month, according to
Investment Capital Ukraine head of research Alexander Valchyshen, losing up to
$1 billion as of Dec. 6.
The
central
bank announced that in November it covered $578 million in bond payments,
and paid back $955 million to the International Monetary Fund, its last loan
payment of the year to the Washington, D.C.-based international lender. The
National Bank of Ukraine also said it made nearly $800 million in currency
interventions last month.
Excluding
gold, reserves most likely dropped to around $17 billion, which is now just
barely enough to cover more than two months of imports, wrote Timothy Ash of
Standard Bank in a note from London.
“This
was a bit unexpected…it looks like there were sizable interventions…there is
some kind of demand for U.S. dollars so the central bank intervened to keep the
hryvnia currency stable,” said Valchyshen.
Not
in free float, he added that the hryvnia currency is pegged too strong to the
U.S. dollar, saying that its “fundamental value should be at least Hr 8.44/$1,
and for better prospects of real gross domestic product growth, it should be
weaker and closer to Hr 9.0/$1.”
Loosening
monetary policy has been a key IMF precondition for unlocking a loan to
Ukraine’s struggling economy, which is entering its sixth straight month of
recession.
Kyiv Post editor Mark
Rachkevych can be reached at [email protected].
