The Ukrainian hryvnia fell down once again. On the interbank Feb. 20 trading session, the currency fell to Hr 29.2-29.7 per dollar and Hr 32.3-32.8 per euro.
The National Bank of Ukraine has given up on trying to fix the hrvynia at a rate other than the market one.
During the past five days, the hrynvia per dollar exchange rate has been falling by an average of Hr 0.45 on a daily basis. Just four months ago, the hryvnia was around Hr 13 per dollar.
Timothy Ash, a Standard Bank analyst in London, is concerned Ukraine’s currency hasn’t seen bottom yet because of Russia’s war against Ukraine and its harm to the economy.
This has consequences on the International Monetary Fund’s $17.5 billion package for Ukraine where new strains and holes in the financial system will soak up bigger chunks of it.
“The IMF program is bound or certain to fail unless the conflict in the east stops or stabilizes,” said Ash naming the hryvnia a “conflict currency.”
Oleksandr Parashchiy, an expert at Kyiv-based Concord Capital, agrees that the IMF loan is simply not enough. In theory there should be no macroeconomic reasons explaining the hrvynia’s slide.
“The core reason for the hryvnia weakness is the lack of trust,” emphasized Paraschiy. The absence of trust between the NBU, the president and the rest of the government is mirrored in the hryvnia instability. If nothing changes Ukraine’s currency will continue looking for a new bottom.
“At this moment I cannot say what could trigger such a return of trust,” Parashchiy said.
On Feb. 19, the National Bank of Ukraine’s press service wrote on its Facebook page that Ukrainians are filling up banks with foreign currency, a sign of confidence in the banking system. “All of this helps for the general stabilization of the situation in the currency market,” the statement said.
But Parashchiy said that Ukrainians are still holding on to their dollars. “At this stage, I do not see any reason in the near future for them to change their mood,” the analyst said.
Ash thinks it’s the West’s responsibility to keep Ukraine’s economy on its feet. “The West is not providing the diplomatic, military or financial support or leadership sufficient to allow the Ukrainians to hold the line – military or the finance front,” he emphasized.
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].
