Ukraine central bank takes extra foreign currency liberalization steps

The National Bank of Ukraine (NBU) announced on May 24 that it took the latest step in its so-called debureaucratization process of its foreign currency operations. In particular, the NBU eased the procedures for returning foreign investments by cancelling the requirement to prove that the investments indeed occurred. Also, the NBU abolished a set of technical requirements for obtaining permission for foreign currency operations. 

Serhiy Parkhomenko, the head of the open market department at the NBU, mentioned that the bank plans to reduce this week the number of days needed for verifying foreign currency purchase requests (currently the t+2 rule is in force), reported the ubr.ua news site the same day. He also said the NBU will also consider in June reducing the percentage of the obligatory sale requirement of export proceeds, which is currently 75%.  

Alexander Paraschiy: The current positive tendencies at the ForEx – with the NBU still purchasing substantial sums of foreign currency (USD 258.1 mln from the start of the month) – are encouraging the regulator to take further liberalization steps. The minor debureaucratization steps so far touched only a very narrow segment of players. However, if the NBU indeed lowers the percentage of the obligatory foreign currency sale requirement, as well as narrows the number of days needed for verification, it will be a very strong signal for the market that the economic situation is improving, which will add confidence to the national currency. Still in light of weakening resource prices at the global market and in view of the fast revival of non-energy imports currently occurring, we can hardly expect stronger liberalization moves since we expect some depreciation pressure to return to the market in the nearest future.