August 27, 2019 | Cbonds
|Quarterly income tax payments caused banking-sector liquidity to fall to around UAH90bn (US$3.6bn), where it was last week despite support from the NBU. To recover to a comfortable UAH100bn (US$4bn), liquidity will require additional support, which can come from VAT refunds, budget expenditures, and the FX market.|
Last week started off with a significant outflow from budget accounts, which amounted to UAH13bn (US$0.52bn), causing liquidity to fall to UAH87bn (US$3.5bn). With large T-bill redemptions and hard currency purchases by the NBU, liquidity slightly recovered to above UAH90bn (US$3.6bn). But to recover to a comfortable UAH100bn (US$4bn), liquidity will require additional inflows from the NBU, but most important, from budget accounts.
This month, the net balance of Treasury operations is minus UAH8.9bn (US$0.35bn), which can be returned to the banking system this week through VAT refunds, which, until the end of last week, amounted to UAH4bn (US$0.16bn). This is low compared with the average monthly amount UAH13.4bn (US$0.54bn), and July's UAH10bn (US$0.4bn). So, about UAH6bn (US$0.24bn) can enter liquidity this week from budget accounts.
ICU view: Liquidity will gradually recover with VAT refunds, while funds from hard-currency purchases by the NBU will be spent on bond purchases, decreasing the positive impact of inflows. As a result, liquidity will stay in the range of UAH90-100bn (US$3.6-4bn) with slight recovery. The key point will be budget expenditures, which currently are significantly lower than funds collection.
|Full company name||ICU|
|Country of risk||Ukraine|