Business reacted to the NBU’s clarification of temporary currency restrictions

08/ 09/ 2022

On September 5, the National Bank of Ukraine published Resolution No. 197 dated September 2, 2022, which updated and clarified the temporary currency restrictions established by NBU Resolution No. 18 of February 24, 2022 On the operation of the banking system during martial law. As the NBU notes in its press release, the adopted clarifications regarding currency restrictions are aimed at ensuring the macroeconomic stability of Ukraine. Thus, from September 6, Ukrainian borrowers are allowed to transfer foreign currency to external creditors to pay interest payments on the corresponding loans. The regulator expects that this will help improve business environment which is important for the recovery of Ukraines economy and will have a controlled impact on international reserves. However, credit agreements with non-residents, payments on which were actually made when it was necessary to repay obligations under credit agreements to foreign financial institutions at the level of the non-resident creditor (parent company), fall under the restriction on interest payments. Equity loan agreements often have provisions that give some flexibility in choosing the timing for repaying the loan body and the accrued interest. For example, if the loan repayment date is December 31, 2024, interest is paid after the final loan repayment date. At the same time, the borrower has the right to early repay the loan and to independently choose the order of repaying obligations. Also subject to restrictions are loans for which there is at least some debt, and for equity loans, it is usually due to the fact that payments on them are made as needed and if funds are available since there is no liability for delay. Thus, the NBU permission for the transfer of foreign currency by external creditors for the payment of interest payments cannot be used by companies with credit agreements that indicate the date for the corresponding interest payments that do not fall in the period from February 24, 2022 to August 10, 2022. Thus, the date for interest payment should be understood as the final (farthest) date determined by the terms of the credit agreement for the timely execution of such payment. Under the current conditions, when the profitability of individual Ukrainian companies differs significantly due to regional specificity or due to the loss of property as a result of hostilities, it does not seem justified to limit the possibility of paying monetary obligations with interest at the expense of intra-group loans (not credit funds). Besides, the National Bank of Ukraine determined that in order to make calculations in foreign currency, the enterprise must first use the foreign currency available to it, and then, if necessary, buy it on the currency market of Ukraine. At the same time, banks are prohibited from terminating foreign exchange supervision over compliance by Ukrainian businesses with the settlement deadlines for the export or import of goods based on documents confirming the termination of obligations by offset. According to the business community, although these changes are aimed at regulating and protecting the countrys balance of payments during the war, they significantly limit the right of business to carry out transactions with currency. For example, export companies have obligations to foreign consumers for the repair and maintenance of equipment, as well as the need to promote brands and products in these markets. Therefore, the European Business Association welcomes the changes in the temporary currency regulation that is positive for business. At the same time, we hope that the introduced changes will really contribute to the preservation of macroeconomic stability of Ukraine in the context of martial law and will provide the regulator with the possibility to consider business proposals regarding the revision of currency restrictions, namely by: increasing the limits for cashless payments for goods and services abroad using hryvnia corporate payment cards; meeting the need of insurers to fulfill their obligations to pay reinsurance premiums under reinsurance contracts with non-resident reinsurers to ensure the solvency of insurers and the fulfillment of contractual obligations; adding clients of authorized institutions to the list of those exempted from the ban on cross-border transfers of foreign currency – it is necessary to ensure the current settlements with international payment systems where postal operators are a direct participant, namely transactions for the transfer of postpaid payments in hryvnias / foreign currency collected from recipients of international postal items on the territory of Ukraine under the agreements between the postal operator of Ukraine and the postal services of foreign countries.

Thus, from September 6, Ukrainian borrowers are allowed to transfer foreign currency to external creditors to pay interest payments on the corresponding loans. The regulator expects that this will help improve business environment which is important for the recovery of Ukraine’s economy and will have a controlled impact on international reserves. However, credit agreements with non-residents, payments on which were actually made when it was necessary to repay obligations under credit agreements to foreign financial institutions at the level of the non-resident creditor (parent company), fall under the restriction on interest payments. Equity loan agreements often have provisions that give some flexibility in choosing the timing for repaying the loan body and the accrued interest. For example, if the loan repayment date is December 31, 2024, interest is paid after the final loan repayment date. At the same time, the borrower has the right to early repay the loan and to independently choose the order of repaying obligations. Also subject to restrictions are loans for which there is at least some debt, and for equity loans, it is usually due to the fact that payments on them are made as needed and if funds are available since there is no liability for delay. Thus, the NBU permission for the transfer of foreign currency by external creditors for the payment of interest payments cannot be used by companies with credit agreements that indicate the date for the corresponding interest payments that do not fall in the period from February 24, 2022 to August 10, 2022. Thus, the date for interest payment should be understood as the final (farthest) date determined by the terms of the credit agreement for the timely execution of such payment. Under the current conditions, when the profitability of individual Ukrainian companies differs significantly due to regional specificity or due to the loss of property as a result of hostilities, it does not seem justified to limit the possibility of paying monetary obligations with interest at the expense of intra-group loans (not credit funds).

Besides, the National Bank of Ukraine determined that in order to make calculations in foreign currency, the enterprise must first use the foreign currency available to it, and then, if necessary, buy it on the currency market of Ukraine. At the same time, banks are prohibited from terminating foreign exchange supervision over compliance by Ukrainian businesses with the settlement deadlines for the export or import of goods based on documents confirming the termination of obligations by offset. According to the business community, although these changes are aimed at regulating and protecting the country’s balance of payments during the war, they significantly limit the right of business to carry out transactions with currency. For example, export companies have obligations to foreign consumers for the repair and maintenance of equipment, as well as the need to promote brands and products in these markets.

Therefore, the European Business Association welcomes the changes in the temporary currency regulation that is positive for business. At the same time, we hope that the introduced changes will really contribute to the preservation of macroeconomic stability of Ukraine in the context of martial law and will provide the regulator with the possibility to consider business proposals regarding the revision of currency restrictions, namely by:

increasing the limits for cashless payments for goods and services abroad using hryvnia corporate payment cards;
meeting the need of insurers to fulfill their obligations to pay reinsurance premiums under reinsurance contracts with non-resident reinsurers to ensure the solvency of insurers and the fulfillment of contractual obligations;
adding clients of authorized institutions to the list of those exempted from the ban on cross-border transfers of foreign currency – it is necessary to ensure the current settlements with international payment systems where postal operators are a direct participant, namely transactions for the transfer of postpaid payments in hryvnias / foreign currency collected from recipients of international postal items on the territory of Ukraine under the agreements between the postal operator of Ukraine and the postal services of foreign countries.