The National Bank of Ukraine this week hit back at claims of
double standards and a lack of transparency in its provision of
dollar liquidity to Ukrainian banks.
It insisted there is ample dollar liquidity in the swap
market for banks to meet their dollar obligations. Sergei
Kruglik, head of the international department of the National
Bank of Ukraine, rejected claims that the National Bank is
rationing dollars to help support the hryvnia.
There are no restrictions on accessing the foreign
exchange market for Ukrainian banks or corporates to repay
their debt obligations, he told Emerging Markets.
Ukraines corporates and banks have access to
dollars in the market and in their own reserves.
Kruglik also poured cold water on hopes the National Bank
might open its dollar swap lines to privately owned Ukrainian
banks and corporates. We will not be providing dollar
liquidity to private companies and banks, he said.
The refusal to open the National Banks dollar swap
line comes in spite of claims from Ukrainian corporates and
banks of a lack of dollar liquidity in the swap market.
According to locals, both the depth of the inter-bank
market and NBU currency auctions are insufficient to fulfil
foreign currency demand, Commerzbank analyst Barbara
Nestor said in a report this week.
Ukraine faces an overhang of foreign currency demand of some
$10 billion, while the National Banks monthly auctions
amount to around just $350 million, according to
The NBU has imposed a series of exchange controls for
non-standard transactions to be able to control the
hryvnia, said Nestor. The Bank appears to be
rationing foreign exchange so as to encourage the private
sector to source foreign exchange on a bilateral basis from
parent groups or otherwise, in the absence of it, structure
foreign debt payments.
Kruglik insists this does not pose a problem. I
dont see any problem for banks in Ukraine to repay their
maturing Eurobonds. They have sufficient reserves and access to
foreign currency in Ukraine.
Alfa Bank Ukraine, a lending arm of the Alfa Group,
controlled by the Russian billionaire Mikhail Fridman, last
week blamed a delay in its repayment of the principal on $100
million of bonds on a lack of dollar supply in the Ukrainian
interbank market and restrictions by the National Bank of
Ukraine. Alfa repaid the bond on Friday morning, avoiding
triggering a default on the Eurobonds.
Market participants dismissed the move as a strategic
attempt by Alfa to gain access to dollar funds at cheaper rates
through the National Banks dollar swap facility.
State-owned enterprises including Naftogas and Ukreximbank
have access to dollar liquidity through the National Bank at
better rates than those available in the swap market.
Ratings agency Moodys this week cited the
uncertainty generated by a series of capital controls
implemented by the National Bank of Ukraine to ration foreign
currency among the reasons for its downgrade of the
sovereigns foreign and local currency government bond
ratings to B2 from B1. Moodys said capital controls
heighten the possibility of default by Ukrainian
corporations and banks on foreign currency debt
Kruglik responded: We dont have any restrictions
or any limits on access to hard currency. We have announced all
the interventions planned by the NBU over the next few