NBU reserves decline by $400 million; IMF tentatively agrees Ukraine loan; Merchandise trade deficit narrows; Naftogaz to triple gas imports; Ukraine grain exports seen strong; Industrial output decline slows.
NBU reserves decline by $400 million
The National Bank of Ukraine’s (NBU) gross international reserves dropped by 1.6 percent ($400 million) in June to $27.3 billion, remaining down 13.3 percent compared to the beginning of the year. The NBU sold $700 million of foreign currency last month, most of it likely to Naftogaz Ukraine to help it pay for May’s natural gas imports.
IMF tentatively agrees Ukraine loan
The International Monetary Fund mission that completed its visit to Kyiv last week agreed to recommend disbursement of the third loan tranche worth $3.3 billion to the country, but the final approval of the loan by the fund’s executive board in late July or early August is conditioned on the passage of legislative amendments facilitating banking recapitalization. The sides agreed the Ukrainian government would be able to use $1.9 billion out of the third tranche to cover its foreign debt repayments. The allocated amount fully covers the $500 million sovereign Eurobond maturing on Aug. 5, another $700 million of government eurobonds due on Sept. 15 and $500 million of Naftogaz Ukraine eurobonds maturing on Sept. 30. Additionally, the IMF revised its macroeconomic forecast for Ukraine, downgrading its estimate of decline in gross domestic product for 2009 to 14 percent from 8 percent. But the IMF improved its inflation forecast to 13 percent (from 16 percent). Ukraine has received $7.3 billion out of the IMF’s $16.5 billion standby loan program approved last November.
Merchandise trade deficit narrows
Ukraine’s merchandise trade deficit narrowed to $300 million in May from $500 million the month before, bringing the country’s foreign trade gap in January-May to $2.2 billion, a four-fold decrease compared to the same period a year ago. Merchandise exports declined by 44 percent year-on-year in January-May to $14 billion on a 57 percent slump in metallurgical exports. Exports of virtually all other goods also declined sharply, with only food exports achieving an 18 percent year-on-year gain thanks to higher grain and oilseed sales. Imports dropped by 52 percent to $16 billion over the period on across-the-board declines, including a 71 percent slump in machinery imports and a 43 percent drop in fuels and minerals imports.
Naftogaz to triple gas imports
Ukraine’s oil and gas monopoly Naftogaz has paid Russia’s Gazprom $300 million for 1.1 billion cubic meters (bcm) of natural gas imported in June and requested a four-fold increase in daily gas supplies for July. Due to high gas prices it was charged in the first half of the year, Naftogaz limited gas imports over the period to the minimum needed to satisfy current consumption needs. In July, when the gas price for Ukraine declined to $198 per thousand cubic meters (tcm) from $271/tcm in April-June, Naftogaz decided to boost gas imports to 0.12 bcm daily so as to pump additional volumes into its underground storage facilities ahead of the heating season. Government officials earlier announced Ukraine had already put 19.5 billion cubic meters of gas into storage. If that statement is accurate, Ukraine should face no problem accumulating required gas volumes to meet its gas transit obligations for the rest of the year.
Ukraine grain exports seen strong
Ukraine can potentially export 18-22 million tons (mt) of grain crops in the 2009-10 marketing year (July 2009-June 2010) given leftover stocks of 7.3 mt from the previous year and estimated annual domestic grain consumption of 25-26 mt. The leftovers, as of July 1, were 35 percent higher than a year ago and included 3.4 mt of wheat, 1.1 mt of corn, 1.8 mt of barley and 0.4 mt of rye. Officials estimate this year’s grain harvest at 42-43 mt, below 53 mt in 2008 due to less favorable weather conditions.
Industrial output decline slows
Ukraine’s industrial output rose by 3.1 percent in June compared to May and slowed its rate of decline in year-on-year terms (versus June 2008) to 27.5 percent from 31.8 percent year-on-year registered in both April and May. The largest year-on-year declines in output in June were recorded in machine-building (-48 percent), construction materials (-42 percent), metallurgy (-39 percent) and mining (-32 percent). Food-processing output inched up 0.9 percent for the first time since May 2008. June output statistics suggest the domestic industrial sector is bottoming out.
