Ukraine: Borrowing from Russia to pay Russia
Ukraine’s finances are still in critical condition despite the central bank letting the hryvnia float on February 7 to ease pressure on its quickly dwindling foreign currency reserves. By year-end, Ukraine has to repay about $9 billion of foreign currency debt, while the central bank’s reserves are at $17.8 billion, its lowest level since 2006, after in January making $1.1 billion in debt repayments and spending $1.7 on currency interventions in the interbank market.
Additionally, since the start of February, the corresponding accounts banks have with the central bank decreased by $210 million – this figure allows to estimate amount of regulator’s interventions this month.
On February 11 the hryvnia slipped in value reaching 8.63 to the dollar, after ending at 8.5 a day earlier. The National Bank’s declared willingness to let market forces define the rate does not mean that it and its interventions won’t be a part of these market forces. Consequently, the regulator needs more money.
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