KYIV, March 22 – Ukraine’s central bank shelled out more than $1 billion last week to support the country’s local currency, the hryvnia, as falling global demand for steel caused by coronavirus pandemic depletes hard currency inflow.

The National Bank of Ukraine sold $1.09 billion for hryvnias in the week ending March 20, stepping up its forex interventions from $981 million the previous week, according to NBU data. The NBU sold a total of $2.67 billion since the year’s start.

The hryvnia closed at UAH 27.5 per U.S. dollar on Friday, losing 10% of its value since March 10, when it traded at UAH 24.9/dollar, according to the NBU.

The rising pressure comes as Ukraine is bracing for an economic impact of the coronavirus outbreak, which is already wreaking havoc on global financial markets by drastically reducing demand for commodities, such as steel, which is Ukraine’s main export revenue.

Almost 1 billion people worldwide, including much of the U.S. and Europe, were ordered to stay at home amid fears that highly contagious and quickly spreading coronavirus would overwhelm critical healthcare infrastructure, potentially causing millions of deaths.

Ukraine, which also issued a stay-at-home order for most of the country, is only at the beginning of this impact and more financial pain is probably ahead, including weakening hryvnia and an economic contraction this year.

Ukraine’s economy may shrink 4% on year in 2020, while the hryvnia will lose value and trade at UAH 30/dollar later this year, according to the latest forecast from Dragon Capital, an investment bank.

“This makes sense, but all forecasts are very uncertain now,” Anders Aslund, an analyst at the Atlantic Council, a Washington-based think tank, said.

In the worst-case scenario, if the lockdown continues through June-July, Ukraine’s economy may contract 9% on the year in 2020 with the hryvnia trading at UAH 35/dollar, Dragon Capital said.

Ukraine had 47 confirmed cases of the virus as of March 21, fewer than its neighbors, but reported three deaths and has imposed similarly tough measures in a bid to curtail the spread of the coronavirus -- including virtually sealing the border and shutting down nonessential stores in many cities.

Facing hard financial choices, the Ukrainian government has scrambled for negotiations with the International Monetary Fund for $5.5 billion loan, but is also seeking to tap the IMF’s special $50 billion emergency fund created to help countries fight coronavirus pandemic.

Ukraine may need up to $10 billion to be able to fight the pandemic and to overcome its damage to the country’s economy, Aslund said, adding that Kyiv would have "no choice" but to agree to the IMF conditions as failure to do so would be devastating.

Oleg Churiy, the deputy governor of the NBU, said the bank’s forex reserves now exceed $24 billion and is enough to support the hryvnia amid coronavirus pandemic.

"Today we have enough reserves to continue smoothing out fluctuations,” Churiy said Friday. “The reserves today exceed $24 billion.”

Prime Minister Denys Shmygal, in a video address to the national on Sunday, said Ukraine is also in talks with the European Union for loans that would help support small- and medium-size businesses hit hard by coronavirus.

Ukraine's economy expanded 3.2% in 2019 compared with 3.4% in 2018 and 2.5% in 2017, according to preliminary data released by the State Statistics Service. (nr/ez)