Ukraine's international reserves declined for the third month in a row in October, under pressure from a trade deficit and delays in the arrival of fresh international aid. Reserves decreased by 1.9% to $38.97bn, the National Bank of Ukraine (NBU) reported on November 8. (chart)

The NBU said the fall was due to its interventions in the currency market and the country's foreign currency debt payments as well. However, the impact of these factors was partially offset by income received from international partners, according to the NBU.

During October, the NBU's net sale of currency amounted to $3.34bn, compared with $2.69bn in September. The increase in interventions can be attributed to heightened demand for currency during the transition from a fixed exchange rate to managed exchange rate flexibility.

Furthermore, in the same month, $3.31bn was deposited into the government's foreign currency accounts at the NBU. This amount included $1.6bn in macro-financial assistance from the European Union, $1.15bn as a grant from the United States and $572.7mn from the placement of foreign government bonds.

On the other side of the ledger, the government made foreign currency payments of $892.5mn to service and repay state debt. Additionally, Ukraine disbursed $80.1mn to the International Monetary Fund (IMF).

However, Ukraine’s balance of trade situation has been deteriorating this year. Ukraine's international trade fell again in September, increasing the country's trade deficit to $0.8bn, primarily driven by a contraction in foreign trade, UBN reported on November 6.

Over the first nine months of the year, the export of goods saw a significant decrease of 35.9%, while imports recorded a contrasting trend with a 16.7% increase. In September, when compared to August figures, both exports and imports of goods exhibited declines of 1.9% and 3.1% respectively.

Specifically, the export volume of goods in September amounted to $2.5bn. This decline in exports was observed across nearly all major product groups and regions. However, problems in exporting grain caused by the Russian blockade of Ukraine’s sea ports have been a major contributing factor; as bne IntelliNews reported, despite farmers expecting a larger harvest this year, Ukraine grain exports are down by a third this year. Grain is Ukraine’s main source of foreign exchange earnings.

The most substantial decreases in nominal terms were witnessed in exports to EU countries, falling by 35.3%, and Asia, which experienced a decline of 50.3%. Exports to African countries fell by 43%, America by 40.9% and CIS countries by 19.4%.

On the import front, September saw import volumes of $5.4bn. Imports from EU countries grew by 17.5%, while Asia saw a 12.3% uptick. Imports from America also recorded an increase of $116mn. In contrast, imports from the CIS countries decreased by 15.7%.

Ukrainian import volumes were twice as large as exports in the first nine months of this year putting more pressure on the government resources and undermining the hryvnia, reports the State Customs Service.

Imports into Ukraine reached $46.6bn between January and September, while exports amounted to $27.1bn, leaving a $19.5bn trade deficit. The overall trade turnover for Ukraine in the first nine months was $73.7bn.