Ukraine's international reserves fell by 6% to $36.6 billion in October 2024. The decline was driven by foreign exchange interventions by the National Bank of Ukraine (NBU) to stabilize the hryvnia exchange rate and significant debt payments made by Ukraine in foreign currency. However, the NBU remains optimistic and predicts that reserves could grow to $43.6 billion by the end of the year, thanks to promises of financing from international partners.
Why have reserves decreased?
The significant 6% decline in reserves is explained by several main factors. The NBU carried out foreign exchange interventions, selling foreign exchange to stabilize the market and contain exchange rate fluctuations. Such a policy was necessary to support the economy, which is facing the consequences of the war and a significant foreign exchange deficit. In total, the NBU's net foreign exchange sales in October amounted to $3.43 billion.
In addition to interventions, large sums were directed to servicing and repaying external public debt. Among the debt payments:
- $710 million – repayment of domestic government foreign currency bonds (OVDP);
- $186 million – payments to the World Bank;
- $21.6 million – repayment of debt to the European Investment Bank (EIB);
- $11.6 million – payments of debt to the European Union;
- $14.2 million – payments to other international creditors;
- $87.9 million – payment to the International Monetary Fund.
Funding and support from international partners
To offset costs and support reserves, Ukraine continues to receive significant international aid and issue bonds. In October, the government’s foreign exchange accounts with the NBU received $1.99 billion, which became an important source of support for reserves. Key receipts were:
- $1.11 billion from the International Monetary Fund (IMF);
- $569.1 million from the placement of foreign currency government bonds;
- $289.5 million from the Government of Canada;
- $21.6 million as a grant from the Government of Serbia.
NBU forecast: optimism despite reduction in reserves
Despite the decrease in reserves, the NBU assures that the volume of international reserves remains at a level sufficient to maintain the stability of the country's foreign exchange market. According to NBU forecasts, reserves may increase to $43.6 billion by the end of the year. Such expectations are based on assurances of further financial support from international partners, which will allow to compensate for the currency deficit and ensure financial stability.
Challenges and prospects
The decline in international reserves reflects the difficult economic realities of war, when it is necessary to simultaneously maintain currency market stability, meet debt obligations, and provide for defense and economic recovery spending. However, strong international support and the NBU's active fiscal policy give reason to hope for a gradual recovery of reserves and economic stability in the long term.
