The business community asks not to shorten the terms for returning foreign currency earnings

02/ 11/ 2023

Business has long emphasized the importance of gradually liberalizing currency restrictions, particularly to facilitate activities such as exports, imports, global expansion, and more under current conditions. A significant step in this direction was the unveiling of the Currency Restriction Mitigation Strategy in July 2023, aiming for greater exchange rate flexibility and a return to inflation targeting. However, this week, there has been information in the media about the possible introduction of stricter terms for repatriating foreign currency earnings, specifically involving the reduction of maximum settlement deadlines for certain export and import transactions. Its worth noting that for certain member companies of the EBA, the export of their products constitutes around 80% of their product portfolios. However, the state of relationships between Ukrainian companies and foreign counterparts has been significantly complicated since the full-scale invasion of Russia into Ukraine. Primarily, the lack of access to Ukrainian ports has led to an extended transport route to end customers, taking 4-6 months. Additionally, according to business representatives, due to the ongoing hostilities, consumers of products require maintaining a non-depleting stock of finished products in foreign warehouses for 4-5 months as a guarantee of supply stability. This, combined with the standard payment delay of 1-2 months, results in an almost year-long cash turnover cycle. The existing 180-day restrictions, as reported by businesses, sometimes no longer allow for effective export business, and entrepreneurs periodically propose extending the maximum return periods. Undoubtedly, the country is facing a multitude of challenges, including those on the economic front. However, having at least some degree of stability and predictability is crucial for businesses to continue operating and overcoming the new challenges that periodically arise on the horizon. Therefore, the European Business Association kindly requests an understanding of the situation that impacts its operations and requirements within the framework of global interaction. In particular, the community appeals to the Prime Minister of Ukraine, Denys Shmyhal, the Governor of the National Bank of Ukraine, Andriy Pyshnyy, and the Chairman of the Verkhovna Rada Committee on Finance, Taxation, and Customs Policy, Danylo Hetmantsev, to consider the possibility of preventing further reduction of maximum return periods for foreign currency earnings and the introduction of any additional currency restrictions. They are also requested to consider the possibility of extending the mentioned foreign currency return periods. Furthermore, it is proposed to consider the feasibility of exempting companies from responsibility in cases where non-resident counterparts fail to make timely payments for goods/services or fail to return prepayments to residents. This issue does not entirely fall within the responsibility of businesses operating in Ukraine, so it is considered unusual to impose various forms of responsibility on them in the current challenging realities, such as changing VAT refund rules, etc. The EBA is ready to hold a separate meeting to discuss these matters and, therefore, hopes for dialogue in this context. We have now received a response from the National Bank regarding our inquiry about the reduction of settlement deadlines. Additional clarifications from the NBU are included in this letter.

However, this week, there has been information in the media about the possible introduction of stricter terms for repatriating foreign currency earnings, specifically involving the reduction of maximum settlement deadlines for certain export and import transactions.

It’s worth noting that for certain member companies of the EBA, the export of their products constitutes around 80% of their product portfolios. However, the state of relationships between Ukrainian companies and foreign counterparts has been significantly complicated since the full-scale invasion of Russia into Ukraine. Primarily, the lack of access to Ukrainian ports has led to an extended transport route to end customers, taking 4-6 months. Additionally, according to business representatives, due to the ongoing hostilities, consumers of products require maintaining a non-depleting stock of finished products in foreign warehouses for 4-5 months as a guarantee of supply stability. This, combined with the standard payment delay of 1-2 months, results in an almost year-long cash turnover cycle. The existing 180-day restrictions, as reported by businesses, sometimes no longer allow for effective export business, and entrepreneurs periodically propose extending the maximum return periods.

Undoubtedly, the country is facing a multitude of challenges, including those on the economic front. However, having at least some degree of stability and predictability is crucial for businesses to continue operating and overcoming the new challenges that periodically arise on the horizon.

Therefore, the European Business Association kindly requests an understanding of the situation that impacts its operations and requirements within the framework of global interaction. In particular, the community appeals to the Prime Minister of Ukraine, Denys Shmyhal, the Governor of the National Bank of Ukraine, Andriy Pyshnyy, and the Chairman of the Verkhovna Rada Committee on Finance, Taxation, and Customs Policy, Danylo Hetmantsev, to consider the possibility of preventing further reduction of maximum return periods for foreign currency earnings and the introduction of any additional currency restrictions. They are also requested to consider the possibility of extending the mentioned foreign currency return periods. Furthermore, it is proposed to consider the feasibility of exempting companies from responsibility in cases where non-resident counterparts fail to make timely payments for goods/services or fail to return prepayments to residents. This issue does not entirely fall within the responsibility of businesses operating in Ukraine, so it is considered unusual to impose various forms of responsibility on them in the current challenging realities, such as changing VAT refund rules, etc.

The EBA is ready to hold a separate meeting to discuss these matters and, therefore, hopes for dialogue in this context.

We have now received a response from the National Bank regarding our inquiry about the reduction of settlement deadlines. Additional clarifications from the NBU are included in this letter.