Gold reserves of Ukraine peaked in 2010. At that time, it amounted to about 34 billion 570 million dollars. By July 1, 2013, the country's reserve was reduced by 23 billion 148 million dollars. Thus, in just three years, a decrease in Ukrainian capital by almost a third was recorded. The downward trend in gold reserves and gold in particular continues today.
A bit of history, or the dynamics of reducing the reserve of Ukraine
The gold reserve of Ukraine since the formation of the state has always shown a positive increase. In the period from 1999 to 2013, its reduction was first recorded. The situation is associated with the global crisis, which rolled over the whole world in 2008. Despite the fact that in 2010 the country's reserve reached its maximum, already in 2012 there was a "weight loss" of the state wallet by 22.8% compared with 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 attribute the reduction in the reserve to the government’s attempts to maintain the national currency on the eve of the 2012 parliamentary elections. In May-June 2013, there was another decrease in reserves by $ 2 billion 5 million. The volumes of capital were fixed at the level of indicators six years ago. The reduction in reserve during this period again coincided with the government’s attempts to stabilize the national currency. The situation was aggravated by the need to pay external debt. During this period, a significant decrease in the inflow of funds to Ukraine was recorded.
State sale: first wave
The answer to the question of where is the gold reserve of Ukraine lies in the large-scale sale of yellow metal in 2014. The last active disposal of the asset by the government occurred back in 2004. At that time, 4 tons of metal were sold in the amount of $ 50 million. After that, for 10 years, the country's reserve remained untouchable and was replenished with only 20 tons of gold. The first manipulations to sell the asset began in May 2014. In just a month, the National Bank of Ukraine sold about 2.8 tons or 90 thousand troy ounces of metal for a total of 113 million dollars. The stock of the country was reduced to 40 tons. Note that the time for the sale of the precious metal was chosen extremely unsuccessfully.
Gold reserve of Ukraine
In September 2015, as mentioned above, Ukraine's gold reserve amounted to about 40 tons of precious metal. In October 2014, the government of the state made a second decision to sell its savings. 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 a difficult economic situation. The prerequisite for the "golden sale" was the need to reduce its specific volume to 7% in order to balance gold reserves. Experts estimate this step as desperate, because the country's "airbag" was almost completely sold out, and not at the best prices. Let's retreat to the statistics. In 2011, the price of the yellow metal was about $ 1,850 per ounce. At a time when Ukraine’s gold reserve was under the hammer, the price of the asset varied within $ 1,200. At a time when Ukraine was balancing its reserves by selling an asset, most countries also restructured their reserves, but only through accumulation. Experts do not cease to say that by the end of the year Ukraine may even lose all its gold, since in less than a year it was able to almost completely sell its untouchable stock.
What leads to a rapid reduction in gold reserves?
Gold and foreign exchange reserves continue to decline rapidly. 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 remained. In a critical situation, the country puts the fact that out of the 1.6 billion dollars that are included in gold reserves today, only 2.6 billion is foreign currency on accounts with deposits inclusive. The latter, as a rule, will be in the bank for no more than a year. For the most part, Ukraine’s gold and foreign exchange reserves are formed by securities with a total value of 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 most favorable prices, since the structure of the investment portfolio is hidden from the public. A huge number of rumors that the securities are currently not classified as liquid assets is alarming, therefore, they cannot be sold on the market.
What threatens Ukraine in 2015?
Considering that the gold reserves of Ukraine have been exported outside its borders by the new authorities, and no tranches from the IMF are foreseen, it becomes clear that it will simply not be possible to avoid further gold sales. The worst forecasts suggest 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 the economic policy, including the implementation of all necessary reforms under the IMF program. This will be a prerequisite for the resumption of funding from the fund and will avoid difficult times.
- Ukraine may default on external debts and give preference to the complete depletion of its gold reserves.
- The most unlikely scenario is a divine intervention. The hope 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 not all is lost?
The gold reserve of Ukraine today is 26 tons. After the global sale of the reserve in mid-autumn, by the end of the year, the media reported that the reserve bank was still able to slightly increase capital. According to official figures, 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 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 is planning to increase the gold and foreign exchange reserves of Ukraine in 2015 to $ 15 billion.
Actual situation
The gold reserves of Ukraine have disappeared almost completely due to large-scale sales by the government. Already on January 1, 2015, according to official data of the National Bank, gold and foreign currency reserves amounted to $ 7.533 billion. In less than a year, the “financial pillow” dipped by about 60%. According to the NBU, the reduction of the reserve by $ 2.4 billion for December alone is explained by the dynamics of paying off gas debts from Russia. The reserve was affected by NBU interventions, which resulted in the sale of foreign currency worth $ 831 million. Funds in the amount of $ 738 million went to pay off external debts. These statistics already include the fact that Ukraine received aid in the amount of $ 767 million, of which $ 617 million came from the European Commission, $ 20 million was help 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 went, it is worth saying that it, having only reached its maximum for the entire existence of the state a year ago, today fell to one of its historical minimums. The situation can be attributed to the economic crisis, and to events that take place in the east of the country. On the other hand, it is safe to blame not only the head of the NBU in the situation, but the entire government. In conditions of austerity, when all countries, including Russia, which is far from an enviable situation, increase their reserves in order to strengthen national currencies, Ukraine’s gold and foreign exchange reserves continue to decline. NBU does not cope with its direct functions - the preservation and accumulation of gold reserves.
"Stand out" compared to the rest
World statistics showed that gold purchases over the past year in the world 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 actively continued to increase their reserves. The only country in the world, in addition to Ukraine, which has reduced its gold reserves, is Mexico. Moreover, currency reserves in the country fell to a ten-year low and today amount to only $ 26 billion. The reason for the phenomenon is simple: the state government decided to assist Naftogaz Ukrainy in the return of Eurobonds and funded the import of natural fuels from the EU. The actions of the government of the country are either part of a well-thought-out and yet hidden policy of economic recovery, or the reason is complete incompetence in the field of finance. There is simply no other explanation for the situation.