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Business welcomes the NBU’s decision to extend currency liberalization

07/ 05/ 2024
  The European Business Association has repeatedly emphasized the importance of continuing currency liberalization in the country. Thus, in April, the European Business Association sent an updated and supplemented list of business proposals to ease temporary currency restrictions, which are important to ensure the continuation of normal business operations, fulfillment of obligations to partners and employees, continued financial development, etc. As early as May 3, 2024, the National Bank of Ukraine heard the voice of business and adopted the largest package of currency restrictions for businesses since the beginning of the full-scale war. In particular, the NBU abolished all currency restrictions on imports of works and services, making the Resolution of the Cabinet of Ministers of Ukraine No. 153 “On Certain Issues Related to Imports” dated February 24, 2022 no longer relevant. In addition, the NBU has separately provided for the possibility for businesses to purchase foreign currency and transfer funds abroad to pay airport and port fees, fines, membership fees, as well as funds of representative offices of foreign airlines and international card payment systems to the account of a non-resident legal entity whose interests these representative offices represent in Ukraine. According to the NBU, such measures will contribute to a gradual increase in export revenues to Ukraine. By the way, this easing was also prioritized by the EBA in its business survey conducted in early 2024. The next long-awaited easing was the provision of the possibility to transfer funds abroad under leasing/rental. Legal entities and individual entrepreneurs are now able to transfer funds abroad to settle leasing/rental agreements without additional restrictions on the subject of the lease/rental, as well as the date of the agreement. Previously, this permission was only applicable to leasing/rental of vehicles. The third easing was to allow businesses to repatriate “new” dividends. Thus, companies will be able to repatriate dividends on corporate rights or shares abroad accrued based on the results of operations for the period starting from January 1, 2024. This mitigation does not apply to dividend payments from retained earnings for previous periods or reserve capital. At the same time, in order to minimize risks to macrofinancial stability, the NBU has set a monthly limit for repatriation of “new” dividends at EUR 1 million in equivalent. Compliance with this rule will be monitored through the NBUs automated information system E-limits. The next easing relates to the restriction on repayment of “new” external loans, which are received in foreign currency from abroad after June 20, 2023, to borrowers accounts in Ukrainian banks. The prohibition on purchasing foreign currency to repay “new” loans will apply only to short-term loans with a term of up to one year. In addition, the NBU will allow businesses to purchase foreign currency to pay interest on “new” loans, regardless of the term of the loan. According to the regulator, this will increase the ability of Ukrainian businesses to attract new external loans not only from official partners but also from private investors. In addition, the NBU has provided an opportunity to pay interest payments on “old” external loans, which, in accordance with the terms of the loan agreement, are due from February 24, 2022. For interest payments that are overdue (as of May 1, 2024), the NBU has granted the possibility to transfer no more than EUR 1 million in the equivalent per calendar quarter. However, this restriction will not apply to future scheduled interest payments. To protect macro-financial stability, the regulator has provided additional conditions for such transactions: no overdue debt under the relevant loan agreement as of February 24, 2022; it is prohibited to purchase and transfer funds at the expense of loans or credits received from residents; there is no provision for early payment or restructuring of overdue payments. The business community is grateful to the NBU for further steps towards currency liberalization. At the same time, further liberalization is extremely important. For example, the business community continues to emphasize the need to expand the limits and conditions for paying dividends and interest on “old” debts. At the same time, there are also a number of restrictions on the payment of “old” debts that will not allow businesses to use the Eurobond payment service tool. According to EBA member companies, the inability to make payments carries risks of default for systemic companies in the Ukrainian economy due to the inability to fulfill their debt obligations. This will have a negative impact on the reputation of not only individual companies but also Ukraine as a whole in the international financial market. It is also extremely important to allow representative offices of international card payment systems and foreign airlines to transfer foreign currency to parent companies, to increase the limits on corporate cards in hryvnia for transactions outside Ukraine, etc. So sincerely hope that these steps will find a place in real life. At the same time, we thank the NBU for its cooperation and look forward to further cooperation!

The European Business Association has repeatedly emphasized the importance of continuing currency liberalization in the country. Thus, in April, the European Business Association sent an updated and supplemented list of business proposals to ease temporary currency restrictions, which are important to ensure the continuation of normal business operations, fulfillment of obligations to partners and employees, continued financial development, etc.

As early as May 3, 2024, the National Bank of Ukraine heard the voice of business and adopted the largest package of currency restrictions for businesses since the beginning of the full-scale war.

In particular, the NBU abolished all currency restrictions on imports of works and services, making the Resolution of the Cabinet of Ministers of Ukraine No. 153 “On Certain Issues Related to Imports” dated February 24, 2022 no longer relevant. In addition, the NBU has separately provided for the possibility for businesses to purchase foreign currency and transfer funds abroad to pay airport and port fees, fines, membership fees, as well as funds of representative offices of foreign airlines and international card payment systems to the account of a non-resident legal entity whose interests these representative offices represent in Ukraine.

According to the NBU, such measures will contribute to a gradual increase in export revenues to Ukraine. By the way, this easing was also prioritized by the EBA in its business survey conducted in early 2024.

The next long-awaited easing was the provision of the possibility to transfer funds abroad under leasing/rental. Legal entities and individual entrepreneurs are now able to transfer funds abroad to settle leasing/rental agreements without additional restrictions on the subject of the lease/rental, as well as the date of the agreement. Previously, this permission was only applicable to leasing/rental of vehicles.

The third easing was to allow businesses to repatriate “new” dividends. Thus, companies will be able to repatriate dividends on corporate rights or shares abroad accrued based on the results of operations for the period starting from January 1, 2024. This mitigation does not apply to dividend payments from retained earnings for previous periods or reserve capital. At the same time, in order to minimize risks to macrofinancial stability, the NBU has set a monthly limit for repatriation of “new” dividends at EUR 1 million in equivalent. Compliance with this rule will be monitored through the NBU’s automated information system E-limits.

The next easing relates to the restriction on repayment of “new” external loans, which are received in foreign currency from abroad after June 20, 2023, to borrowers’ accounts in Ukrainian banks. The prohibition on purchasing foreign currency to repay “new” loans will apply only to short-term loans with a term of up to one year. In addition, the NBU will allow businesses to purchase foreign currency to pay interest on “new” loans, regardless of the term of the loan. According to the regulator, this will increase the ability of Ukrainian businesses to attract new external loans not only from official partners but also from private investors.

In addition, the NBU has provided an opportunity to pay interest payments on “old” external loans, which, in accordance with the terms of the loan agreement, are due from February 24, 2022. For interest payments that are overdue (as of May 1, 2024), the NBU has granted the possibility to transfer no more than EUR 1 million in the equivalent per calendar quarter. However, this restriction will not apply to future scheduled interest payments.

To protect macro-financial stability, the regulator has provided additional conditions for such transactions:

  • no overdue debt under the relevant loan agreement as of February 24, 2022;
  • it is prohibited to purchase and transfer funds at the expense of loans or credits received from residents;
  • there is no provision for early payment or restructuring of overdue payments.

The business community is grateful to the NBU for further steps towards currency liberalization. At the same time, further liberalization is extremely important. For example, the business community continues to emphasize the need to expand the limits and conditions for paying dividends and interest on “old” debts. At the same time, there are also a number of restrictions on the payment of “old” debts that will not allow businesses to use the Eurobond payment service tool. According to EBA member companies, the inability to make payments carries risks of default for systemic companies in the Ukrainian economy due to the inability to fulfill their debt obligations. This will have a negative impact on the reputation of not only individual companies but also Ukraine as a whole in the international financial market.

It is also extremely important to allow representative offices of international card payment systems and foreign airlines to transfer foreign currency to parent companies, to increase the limits on corporate cards in hryvnia for transactions outside Ukraine, etc.

So sincerely hope that these steps will find a place in real life. At the same time, we thank the NBU for its cooperation and look forward to further cooperation!

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