Ukrainian currency has beaten the historical record on Feb. 26, reaching 10.33-10.5 per dollar on the interbank exchange market. The previous low came on Dec. 18, 2008, during the financial crisis when the hryvnia several times slightly crossed the line of Hr 10 per dollar during the trading session.
The hryvnia lost almost 28 percent of its value since Nov.
21, when Mykola Azarov’s Cabinet of Ministers postponed signing the Association
Agreement with the European Union which led to the bloodiest political crisis
in country’s history resulting in fell of Viktor Yanukovych’s regime on Feb.
22.
The currency may strengthen when “a new government is
formed as it announces a clear stabilization program and international aid is
provided,” newly appointed central bank governor Stepan Kubiv said.
“If conditions were normal, equilibrium hryvnia rate
would be at 9.2-9.3 per dollar. It would be possible for the National Bank of Ukraine to
keep it at 8.9-9 per dollar,” Kinto asset management company leading analyst
Volodymyr Ovcharenko told the Kyiv Post.
But the conditions are not normal. Given the ongoing
political instability and unclear expectations about politicians who will take
seats in the future government, population and companies keep buying foreign
currency. Besides, substantial amount of imports that exceed country’s exports
require foreign currency to settle the payments.
Moreover, during the week of Feb. 17-21, Ukrainians
withdrew 7 percent of the deposits with the commercial banks. Peak happened on
Feb. 18-20 when deposit outflow reached Hr 30 billion. Impressive amount of
this money could be spent on buying dollars which contributes to weakening of
hryvnia, says Ovcharenko.
The National Bank’s foreign reserves shrank by $2.8
billion in February and now their official figure is as low as $15 billion. It
reduces the opportunity for the regulator to control hryvnia rate fluctuations
through the interventions.
However, Ovcharenko assumes that central bank may
introduce more administrative limitations on foreign currency exchange for the
interbank market traders as well as for the private customers. These measures
may include prohibiting early deposit withdrawal and limiting the amount of
foreign currency that may be purchased in the street exchange points.
Country’s financial state largely depends on receiving
the bailout package while the International Monetary Fund and the EU are considered
to be main sources for this. Ukraine’s Ministry of Finance expects to receive
$35 billion of financial help for own needs in 2014-2015, though the first
tranche is needed not later than by the end of the next week, Mar. 7.
“Talks are being held
with all possible creditors,” Kubiv said on the website of his party,
Batkivshchyna. “We’re in talks with the IMF on changing the investment climate
so investors come to Ukraine and believe in stability.”
“We are ready to
engage,” IMF managing director Christine Lagarde said. “We will probably
shortly send some technical assistance support to the country because this is
our duty to a member, if that member asks,” which is “clearly what is likely to
happen.”
Delays in agreeing the deal will not necessarily lead
directly to Ukraine’s default in a short-term prospect, but pensioners and state
employees may be getting their regular payments late. However, default in a
mid-term perspective remains probable that puts even more pressure on country’s
currency.
Kyiv Post associate business
editor Ivan Verstyuk can be reached at [email protected].
