27 Oct 2023 10:08

NBU raises forecast for international reserves to $41.8 bln as of year's end

MOSCOW. Oct 27 (Interfax) - The National Bank of Ukraine (NBU) now expects the country's international reserves to grow to $41.8 billion by the end of 2023, while in its July forecast it projected they would total $38.3 billion at the end of the year.

The NBU also raised its forecast for Ukraine's international reserves at the end of 2024 and 2025 to $44.7 billion and $45 billion, respectively, from the previous forecast of $42.6 billion and $44.1 billion, Ukrainian media reported, citing updated NBU estimates presented at a briefing on Thursday that was posted on YouTube.

"One of the assumptions is that Ukraine will receive a total of $45 billion in financial aid loans and grants this year. These disbursements remain the main source of covering the high budget deficit, which stands to widen to almost 29% of GDP this year. Through aid, Ukraine has also been able to finance its considerable current account deficit, and the NBU has maintained a high level of international reserves and balanced the FX market," the NBU said.

"An important assumption underlying the forecast remains the sufficiency and regularity of such aid, which requires that Ukraine meet its commitments to international partners," the NBU said.

"For its part, the NBU will be able to maintain international reserves at above $40 billion despite making significant interventions to preserve the sustainability of the FX market amid further currency liberalization measures, among other things," the NBU said.

NBU deputy governor Sergei Nikolaichuk said at the briefing that assurances from Ukraine's international partners indicate the country can count on receiving $45 billion of financial aid this year.

"Of course, there are high risks that this official aid might be lower. These risks have indeed increased in the last month or two. However, the assurances that we're getting from international partners give us reason to nonetheless factor in as the baseline scenario the amount of international aid that is stated in our forecast, namely $45 billion for this year, while in the last forecast we factored in $42 billion," Nikolaichuk said.

He also said the provision of financing to Ukraine from the United States depends significantly on that country's internal political situation, but the NBU expects the $60 billion aid package announced by President Joe Biden to be implemented.

"As for plan B, right now our plan B consists only of working intensively with our international partners. It will be very difficult to fully cover a shortfall in financing from the United States or other international partners," Nikolaichuk said.

NBU governor Andrei Pyshny said the level of partner countries' involvement in the situation in Ukraine gives reason to expect that commitments will be met. "Accordingly, you see this understanding of the National Bank, and not just the National Bank, in the macro forecast and estimates that we factored into the level of gold and forex reserves," he said.

"International financial partners have committed to support Ukraine with a financial package of $115 billion given the baseline development scenario and $140 billion given the negative scenario. As you recall, this is part of the program agreed with the International Monetary Fund, which combines Ukraine's obligations and this package of financial support and aid," Pyshny said.

Ukraine's international reserves shrank by 1.7% to $39.708 billion in September after falling 3.2% to $40.387 billion in August from a record $41.72 billion at the end of July.