Ukraine central bank eases regulations to improve currency inflow

The National Bank of Ukraine (NBU) modestly eased its foreign currency regulations starting Oct. 23, according to an Oct. 22 press release. In particular, the NBU abolished the compulsory sale of foreign currency for grants from IFI’s and the EU. In addition, guarantee deposits from non-residents for privatization purposes won’t be subject to the compulsory sale of foreign currency. On the top of that, the NBU lifted its limit on cash withdrawals from banks in the equivalent of UAH 300,000 per person per day, which is expected to stimulate individuals towards more active foreign currency sales. The bank also liberalized foreign currency payments of Ukrainian telecom operators for purchase of international roaming services.

Alexander Paraschiy: For weeks, the NBU has been speculating on foreign currency deregulation at least in some form. NBU Deputy Head Oleh Churii had mentioned the consideration of reducing the level of compulsory foreign currency sale of export proceeds (currently at 75%). However, all such easing steps are subject to approval by the IMF, which insists that only the successful accumulation of gross international reserves will pave the way for relaxing foreign currency regulations. Since these measures are quite timid and the level of compulsory foreign currency sale for exporters remains unchanged, we can conclude that the IMF does not see any opportunity for stronger liberalization steps at the moment. Recall, the IMF outlined USD 18.3 bln as a target for Ukraine’s gross international reserves for 2015. We project USD 15.3 bln in international reserves by the end of the year.