NBU gross foreign reserves dropped by 1.9% ($0.8bn) m-o-m in October, to $39.0bn, still up 37% or $10bn YTD. The end-October tally was equivalent to 5.2 months of prospective goods and services imports, according to a central bank estimate. Meanwhile, after the NBU transitioned from a pegged exchange rate regime to managed float on Oct. 3, the official rate of the hryvnia to the US dollar strengthened by 0.6% m-o-m in October and a further 0.9% in the first five working days of November, to UAH 36.04:USD.

The Ministry of Finance placed UAH 11.0bn ($305m) of hryvnia-denominated bonds at a primary auction yesterday.

As of end-October 2023, Ukrainian Railways (RAILUA) received UAH 3.5bn ($96m) of state budget funding to purchase of passenger railcars (out of UAH 5bn budgeted for 2023), including a final payment for 100 cars ordered in 2021 and funding for 44 new cars ordered in 2023. By end-2023, state support to the company may reach UAH 11bn, including an additional UAH 1.5bn of state financing for passenger transportation and UAH 6bn of state guarantees for EIB and EBRD loans.

President Volodymyr Zelensky, in a televised address yesterday, spoke out strongly against holding elections in Ukraine, saying “now, in wartime, when there are so many challenges, it is absolutely irresponsible to throw the topic of elections into society.”

Minutes from the latest NBU Monetary Policy Committee (MPC) meeting, which preceded the Oct. 26 meeting of the central bank’s Board, showed that all MPC members voted in favor of changing the operational design of monetary policy to the so-called “lower bound,” with the key rate cut by 400bp to 16% and pegged to the rate on overnight certificate of deposits (CDs). Virtually all MPC members (10 out of 11) also opted for keeping the rates on monetary instruments unchanged at 16% p.a. on overnight CDs, 20% on 3-month CDs, and 22% on refinancing loans. The MPC agreed that the policy shift would enhance the effectiveness of the NBU key rate amid persistent excess bank liquidity by reinforcing the key rate’s signaling role. They justified the decision to keep other rates unchanged by the need to maintain the attractiveness of UAH instruments amid the virtually exhausted potential for further disinflation, continued growth in current deposits at banks and the substantial response of bank deposit rates to earlier NBU key rate cuts. In particular, the rates on term deposits for businesses declined by 1.1pp and 0.9pp in August and September respectively. Household deposit rates registered a more moderate drop: off 0.6pp in August, virtually flat in September, and down again in October.

Ukraine exported 3.4 Mt of grain and oilseeds in October, the fourth month of the marketing year (MY) 2023/24 (July 2023 – June 2024), up 16% m-o-m but down 40% y‑o‑y. Grain exports totaled 2.5 Mt (+21% m-o-m and -44% y-o-y) and oilseed exports stood at 0.9 Mt (+4% m-o-m, -25% y-o-y).

The NBU has announced that the IMF and Ukrainian authorities are starting the second review of the Fund’s $15.6bn 4-year EFF program for Ukraine and Article IV consultations today. Talks, to be conducted virtually and in-person in Warsaw, will focus on Ukraine’s progress meeting the program’s conditionality, the sources of budget deficit financing, the stance of the financial sector, results of bank stress tests, and progress implementing the NBU’s F/X liberalization strategy, including the shift to managed UAH flexibility.

The average base-load electricity price inched up by 1.3% m-o-m to UAH 3,760/MWh in October, up 14% y-o-y. Separately, the National Energy and Utilities Regulatory Commission (NEURC) considers further increases in power price caps, proposing to hike them by 5-23% for selected time slots, particularly the morning and evening peaks.

Commander-in-Chief of Ukrainian Armed Forces Valeriy Zaluzhny offered his straightforward assessment of the current state of the war with Russia and prospects to end it in an opinion piece published by The Economist.

The Cabinet of Ministers submitted a revised 2024 state budget bill to parliament. Compared to the initial version of the document sent to the legislature in mid-September and approved at first reading, the revenue target increased by UAH 22bn to UAH 1,766bn while spending remained unchanged at UAH 3,340bn (including net crediting), implying a deficit of UAH 1,574bn. The government also revised its key macroeconomic projections for this and next year, particularly the exchange rate: to UAH 38.6:USD as of end-2023 (from UAH 40.2:USD) and UAH 42.1:USD as of end-2024 (from UAH 44.2:USD), implying the respective annual averages of UAH 36.9:USD and UAH 40.7:USD. The government also cut its average consumer inflation estimate for 2024 by 5.3pp to 8.5% y-o-y and downgraded the growth forecast for next year by 0.4pp to 4.6%, estimating 2024 nominal GDP at UAH 7,643bn ($188bn).

Ukraine’s central budget provisionally ran a deficit (net of grants) of UAH 140bn or $3.6bn in October, flat m-o-m.

Moody’s affirmed its corporate family rating (CFR) on DTEK Energy at Ca, keeping the rating outlook negative. The agency said its assessment accounted for a high risk of default and low expected recovery for DTEK Energy creditors in view of low electricity demand in Ukraine and NBU regulations prohibiting cross-border currency payments for debt servicing. The negative rating outlook reflected the risk of potential liquidity shortage and major operational disruptions due to Russian attacks.

At least 63 ships with a combined deadweight of 2.6 Mt called at Ukrainian Black Sea ports in October and 46 ships with total deadweight of 2.0 Mt departed over the period, up from a mere 5 vessels ships with deadweight of 0.3 Mt in September.

The National Bank’s Index of Business Expectations, a PMI-type gauge, inched down by 0.5 points m-o-m in October, to 49.6 on a 0-100 scale, dipping below the neutral level of 50 and indicating the prevalence of negative expectations.

Ukraine’s headline current account (C/A) deficit narrowed to $0.8bn in September from $2.1bn in August, bringing the 9M23 gap to $5.5bn, down from a surplus of $7.9bn in 9M22. The financial account (F/A) surplus (including IMF financing) dropped to $0.1bn from a revised $0.8bn in August, bringing the 9M23 surplus to $16.6bn, up from a deficit of $14.2bn in 9M22.

The Ministry of Finance placed UAH 12.0bn ($328m) of hryvnia-denominated bonds and $100m of USD-denominated paper at a primary auction yesterday.