Ukraine's currency reserves plummet 23 percent to nine-year low
By Natalia Zinets and Alessandra Prentice KIEV (Reuters) - Ukraine's foreign currency reserves plummeted by almost a quarter month-on-month in October to $12.6 billion, the central bank said on Friday, due to energy payments and support for the faltering hryvnia currency. Reserves are now at their lowest level since 2005 and the central bank, which drew from its coffers to help state energy firm Naftogaz service its multi-billion dollar debt to Russia, will have to dip into them further as further payments loom. "The dynamics (of the October fall) were influenced by the need to support Naftogaz (with) almost $2 billion ... and also by making payments for natural gas supplies from European suppliers," the bank said in a statement. On Monday the bank said it had sold $1.3 billion in the past month and a half to defend the hryvnia, which has lost around 40 percent of its value against the dollar since the start of 2014 because of political upheaval, ongoing tension with Russia and a separatist conflict in eastern Ukraine. Despite the interventions, the hryvnia lost more ground this week, falling 7.8 percent to 13.96 to the dollar - its weakest since Sept. 19. Continuing hryvnia fragility and upcoming gas payments mean the bank will have to dig even deeper into reserves soon, Standard Bank analyst Tim Ash said in a note. "Ukraine still has $1.6 billion in gas debts to pay by year end, and $700 million-plus a month to pay for any gas deliveries ... foreign currency reserve levels might well drop into single digits by year end, which is very, very low," he said. RUSSIAN GAS Last week Moscow, Kiev and the European Union clinched a deal in Brussels that would restart flows of Russian gas to Ukraine over the winter in return for Naftogaz paying part of its debt and $760 million up front for November supplies. Naftogaz transferred the first $1.45 billion tranche of debt repayment to Russia's Gazprom on Tuesday and pledged to pay the rest according to the schedule, but it has not specified when it will start paying up front for fresh supplies. On Friday the company received a bill for fresh flows from Gazprom, but Naftogaz stressed it would only announce the timing of any payment once it had made the decision to buy more gas. "The amount and schedule of prepayment depends on what volume and when Naftogaz orders gas from Gazprom," Naftogaz said in a statement. The longer Ukraine can put off ordering more Russian gas, the better for currency reserves. On Monday, central bank chief Valeriia Gontareva said the International Monetary Fund, which is supporting Kiev with a multi-billion-dollar loan package, had agreed that the central bank can pay for Russian gas directly from reserves. They are likely already lower than the $12.6 billion figure given for October due to this week's $1.45 billion Naftogaz debt repayment. The last time state dollar-funds were at this level in 2005, reserves staged a dramatic recovery, rising from $9.5 billion to $19.4 by the end of the year due to an influx of foreign investment following the 'Orange Revolution' that stoked hopes of a pro-democracy government. (Editing by Alison Williams and Tom Heneghan)
