Ukraine's gold reserves peaked in 2010. At that time, it was about 34 billion 570 million dollars. As early as July 1, 2013, the country's reserve was reduced by $23 billion 148 million. Thus, in just three years, a reduction in Ukrainian capital by almost a third was recorded. The trend to reduce gold reserves, and gold in particular, continues today.
A bit of history, or the dynamics of Ukraine's reserve reduction
Ukraine's gold reserves have always shown positive growth since the formation of the state. In the period from 1999 to 2013, its reduction was recorded for the first time. The situation is associated with the global crisis that swept the whole world in 2008. Despite the fact that in 2010 the country's reserve reached its maximum, already in 2012 there was a "thinning" of the state purse by 22.8% compared to the previous 2011. If we consider the indicator in absolute terms, we can say that this corresponds to 7 billion 48 million 590 thousand dollars. Experts link the reductionreserve with the government's attempts to keep the national currency on the eve of the 2012 parliamentary elections. In May-June 2013, there was another reduction in reserves by 2 billion 5 million dollars. Capital volumes were fixed at the level of indicators of six years ago. The reduction of the reserve during this period again coincided with the government's attempts to stabilize the exchange rate of the national currency. The situation was exacerbated by the need to pay off foreign debt. During this period, a significant reduction in the inflow of funds to Ukraine was recorded.
State Sale: First Wave
The answer to the question of where the gold reserves of Ukraine lies in the large-scale sale of the yellow metal in 2014. The last active disposal of the asset by the government took place back in 2004. At that time, 4 tons of metal were sold in the amount of 50 million dollars. After that, for 10 years, the country's reserve remained intact and was replenished with only 20 tons of gold. The first manipulations to sell the asset were started in May 2014. In just a month, the NB of Ukraine sold about 2.8 tons or 90,000 troy ounces of metal for a total of $113 million. The stock of the country was reduced to 40 tons. Note that the time for the sale of the precious metal was chosen extremely unfortunate.
Gold reserves of Ukraine
In September 2015, as mentioned above, the volume of Ukraine's gold reserve was about 40 tons of the precious metal. In October 2014, the state government made a second decision to sell itssaving. As a result of the manipulations, the reserve was reduced by 14 tons of precious metal. The head of the National Bank of Ukraine stated that the decision was not caused by the difficult economic situation. The prerequisite for the "gold sale" was the need to reduce its specific volume to 7% in order to balance the gold reserves. Experts assess such a step as desperate, because the country's "airbag" was almost completely sold out, and not at the best prices. Let's take a look at the statistics. In 2011, the price of the yellow metal was about $1,850 per ounce. At the moment when the gold reserves of Ukraine sold under the hammer, the price of the asset varied within 1200 dollars. At a time when Ukraine was balancing its reserves by selling an asset, most countries were also restructuring reserves, but only through accumulation. Experts do not stop talking about the fact that by the end of the year Ukraine may completely lose all the gold, since in less than a year it was able to almost completely sell its emergency reserves.
What is leading to a rapid reduction in gold reserves?
Gold and foreign exchange reserves continue to decline at a rapid pace. This is due to the fact that tranches from the IMF were delayed, while the need to pay external debts and gas in the winter period remained. The country is put in a critical situation by the fact that out of the $1.6 billion that are included in the gold reserves today, only $2.6 billion is foreign currency on accounts with deposits, inclusive. The last ones, likeas a rule, will be in the bank for no more than a year. For the most part, Ukraine's foreign exchange reserves are formed by securities, the total value of which is 9 billion. The remaining one billion is the price of 26 tons of gold. It may not be so easy to sell securities at the best possible prices, since the structure of the investment portfolio is hidden from the public. There are a lot of rumors that the securities are currently not classified as liquid assets, therefore, they cannot be sold on the market.
What threatens Ukraine in 2015?
Given that the gold reserves of Ukraine have been taken out of its borders by the new authorities, and tranches from the IMF are not yet expected, it becomes clear that it is simply impossible to avoid further gold sales. The worst forecasts say that by the end of the year the country's gold reserves will not exceed $4.5 billion. There are only three options for events that do not cease to be considered by world experts in the world of economics.
- The government of Ukraine will take drastic measures to restructure economic policy, including all the necessary reforms under the IMF program. This will be a prerequisite for the resumption of funding from the fund and will avoid hard times.
- Ukraine may default on external debt and give preference to the complete depletion of its gold reserves.
- The most unlikely scenario is divine intervention. hope forthe fact that another large and successful state will come to the aid of the state, which will solve all problems, does not die in the circles of officials and deputies.
Maybe all is not lost?
Ukraine's gold reserves today are 26 tons. After the global sell-off of the reserve in mid-autumn, by the end of the year, information appeared in the media that the reserve bank still managed to increase its capital a little. According to official data, by the end of January 2015, the country's gold volume amounted to about 0.77 million troy ounces against the December figure of 0.76 million troy ounces. We can also say that in dollar terms, Ukrainian gold reserves in January 2015 increased from 911.09 to 967.25 million dollars. The head of the National Bank of Ukraine said that despite forecasts, the government plans to increase Ukraine's gold and foreign exchange reserves in 2015 to $15 billion.
Actual situation
Ukraine's gold reserves have disappeared almost completely due to large-scale sales by the government. Already on January 1, 2015, according to the official data of the National Bank, the gold reserves amounted to 7.533 billion dollars. In less than a year, the "financial cushion" sank by about 60%. According to the NBU, the decrease in the reserve by $2.4 billion in December alone is explained by the dynamics of paying off debts for gas from Russia. The reserve was affected by NBU interventions, which resulted in the sale of foreign currency in the amount of 831 milliondollars. Funds in the amount of $738 million went to repay external debts. These statistics already include the fact that Ukraine received assistance in the amount of $767 million, of which $617 million came from the European Commission, $20 million came from the IBRD and $130 million came from the sale of foreign currency government bonds.
Government incompetence
Considering the question of where the gold reserves of Ukraine have gone, it is worth saying that it, which just a year ago reached its maximum for the entire existence of the state, today fell to one of the historical lows. The situation can be attributed to the economic crisis, and to the events that are taking place in the East of the country. On the other hand, one can safely blame not only the head of the NBU, but the entire government for the situation. In conditions of austerity, when all countries, including Russia, which is in a far from enviable situation, are increasing their reserves in order to strengthen their national currencies, Ukraine's gold and foreign exchange reserves continue to decline. The NBU fails to cope with its direct functions - the preservation and accumulation of gold reserves.
"Stands out" from the rest
World statistics showed that gold purchases over the past year in the world have increased from 400 to 500 tons. This information was provided by the World Gold Council, which is based in London. During the second wave of metal sales in Ukraine, such states as Kazakhstan, Azerbaijan, Belarus, Mauritius continued to actively increase their stocks. The only country in the world, apart from Ukraine, whichreduced its gold reserves - this is Mexico. Moreover, the country's currency reserves have fallen to a ten-year low and today stand at just $26 billion. The reason for the phenomenon is simple: the state government decided to help the Naftogaz Ukrainy enterprise to return Eurobonds and financed the import of natural fuel from the EU. The actions of the country's government are either part of a well-thought-out and so far hidden policy of economic recovery, or the reason is complete incompetence in the field of finance. There is simply no other explanation for the current situation.
