The National Bank of Ukraine continues to lower the hryvnia exchange rate against the dollar. For two weeks now, the currency has been breaking record after record and is currently at a historical high of over 44 hryvnia. In a comment to RBC-Ukraine, the coordinator of expert groups of the Economic Expert Platform, associated member of CASE Ukraine, Oleg Getman, named the main reasons why the national currency exchange rate is currently declining.
Main:
Record exchange rate: The National Bank set the official dollar exchange rate on March 13 at 44.16 UAH, which is a new high. The American currency has been breaking records for several days in a row.
Reasons for the devaluation: The NBU is lowering the hryvnia exchange rate due to the permissible level of inflation and the need to balance the deficit trade balance (in accordance with the proposals of the Cabinet of Ministers).
Impact of assistance: The regulator’s decision was influenced by the delay in international macro-financial assistance to Ukraine.
Forecast until the end of the year: Due to a partial devaluation of the hryvnia, the official NBU indicator may drop to 45 UAH per dollar.
Why is the hryvnia devaluing?
The expert identifies two key factors that guide the NBU:
Controlled inflation. At the beginning of the year, inflation remains within acceptable limits. The National Bank expects that the current exchange rate decrease will not lead to a rise in prices above the projected indicators, therefore, they consider this situation acceptable.
Request from the government and trade deficit. The Cabinet of Ministers has long proposed that the NBU slightly devalue the hryvnia in order to balance Ukraine’s trade balance, which is currently in a severe deficit. Previously, the regulator ignored these proposals, but now decided to listen to them, especially against the background of the delay in international macro-financial assistance.
What will the exchange rate be by the end of the year?
For these reasons, the National Bank decided to partially devalue the hryvnia exchange rate. According to Hetman, by the end of the year the official exchange rate of the National Bank may drop to 45 hryvnias per dollar.
