You're reading: IMF: Including yuan in National Bank reserves may impact quality

Turning part of the National Bank of Ukraine's foreign currency reserves into the Chinese yuan requires careful analysis, as it could worsen the quality of reserves, Max Alier, the IMF Resident Representative for Ukraine said.

The yuan is not a freely convertible currency so the issue of reserve quality could arise, he said at the sixth annual Adam Smith Institute Ukrainian Banking Forum, which opened in Kyiv on Tuesday.

The IMF does not yet have information about talks between Ukraine and China’s central banks, he said.

Commenting on plans to transfer gas settlements with Russia into rubles, Alier said this would not cause any serious changes. "As far as I understand the gas agreement remains in dollars," he said.

Ukraine needs a currency to buy rubles or ruble loans, he added.

The National Bank of Ukraine (NBU) intends to include the Chinese yuan among its forex reserves, the newspaper Kommersant Ukrainy has reported, quoting a source at the NBU.

"We will only hold around $2.5 billion in yuan so far [around 7% of reserves as of the start of November] but it will definitely be there," the source said.

According to the source, representatives of the NBU have reached an agreement with the People’s Bank of China for holding swaps in national currencies.

The Chinese authorities are ready to implement swaps for total trade between the two countries but the NBU has agreed to yuan-based transfers for only one third of payments.

"Even though China doesn’t especially need the hryvnia, it is interested in expanded the zone of influence of its currency to other countries whereas we are interested in differentiating our reserves. We will be the 12th country, which will have swaps in China," the NBU representative said.

The newspaper also quoted a NBU spokesperson as saying that around 45% of the bank’s reserves are in U.S. dollars, euro – 34% and monetary gold – 4.6%.

Ukraine’s international reserves decreased in October 2011 by 2.3%, or by $788 million, to $34.16 billion.

Since the start of the year, the NBU’s reserves have gone down by 1.2%, or by $414.1 million. Ukraine’s international reserves came to $34.576 billion on Jan. 1.