Business met with the Governor of the National Bank of Ukraine

07/ 10/ 2023

Yesterday, representatives of the European Business Association met with the Governor of the National Bank of Ukraine, Andriy Pyshnyy, to discuss issues related to the NBUs exchange rate policy. The meeting also included the participation of NBU Deputy Governor Yuriy Heletiy, Director of the Open Market Operations Department Oleksii Lupin, Director of the Monetary Policy and Economic Analysis Department Volodymyr Lepushynskyi, and other members of the regulators team. At the beginning of the meeting, the representatives of the National Bank briefed the business community on their plans and priorities regarding exchange rate policy. They also shared assessments regarding the initial reaction of the foreign exchange market to the transition to managed exchange rate flexibility, which represents the first stage in the gradual return to market-driven exchange rate determination. Andriy Pyshnyy emphasized that, according to the updated Strategy for the Development of the Financial Sector in Ukraine and the Strategy for Easing Currency Restrictions, transitioning to greater exchange rate flexibility, and returning to inflation targeting, as announced in July of this year, one of the National Banks priorities is exchange rate stability. This is particularly important for bringing inflation back to the NBUs target of 5% in the medium term and further reducing the discount rate. As of today, the situation in the foreign exchange market has stabilized. This is evidenced, in part, by the fact that in recent days of the week, the net currency sales by the NBU were lower than the average daily figure in September, and there has been a gradual reduction in demand for currency and a recovery in supply. Therefore, following the introduction of managed exchange rate flexibility, the NBU sees no grounds for concern but has tools at its disposal for prompt response if necessary. At the same time, Andriy Pyshnyy noted the necessity of repatriating foreign currency earnings obtained from exports. In this regard, the National Bank is taking measures to strengthen banks compliance with currency controls and is engaging in relevant communication with the State Tax Service of Ukraine. In the future, the regulator plans to gradually increase the flexibility of the foreign exchange market. However, this will only happen when proper macroeconomic conditions are in place to avoid shocks to the foreign exchange market and the economy. The NBUs plans include gradually easing currency restrictions on the repatriation of dividends and interest payments on loans. Discussions on these matters are ongoing between the NBU and the IMF, and it is important to take into account the business communitys perspective regarding the prioritization of these relaxations. Currently, the NBU is developing a strategy for credit recovery, which will soon be presented and discussed with the business community. Additionally, the National Bank is actively negotiating with the EBRD and the World Bank to develop mechanisms for insuring military risks. Existing concepts need to be refined to formulate a comprehensive model for insuring military and political risks, upon which a systemic program for post-war recovery in Ukraine will be built. On behalf of the European Business Association, we sincerely thank the NBU team for their ongoing dialogue with the business community, professionalism, openness, and we genuinely hope for further cooperation!

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Yesterday, representatives of the European Business Association met with the Governor of the National Bank of Ukraine, Andriy Pyshnyy, to discuss issues related to the NBU’s exchange rate policy. The meeting also included the participation of NBU Deputy Governor Yuriy Heletiy, Director of the Open Market Operations Department Oleksii Lupin, Director of the Monetary Policy and Economic Analysis Department Volodymyr Lepushynskyi, and other members of the regulator’s team.

At the beginning of the meeting, the representatives of the National Bank briefed the business community on their plans and priorities regarding exchange rate policy. They also shared assessments regarding the initial reaction of the foreign exchange market to the transition to managed exchange rate flexibility, which represents the first stage in the gradual return to market-driven exchange rate determination.

Andriy Pyshnyy emphasized that, according to the updated Strategy for the Development of the Financial Sector in Ukraine and the Strategy for Easing Currency Restrictions, transitioning to greater exchange rate flexibility, and returning to inflation targeting, as announced in July of this year, one of the National Bank’s priorities is exchange rate stability. This is particularly important for bringing inflation back to the NBU’s target of 5% in the medium term and further reducing the discount rate.

As of today, the situation in the foreign exchange market has stabilized. This is evidenced, in part, by the fact that in recent days of the week, the net currency sales by the NBU were lower than the average daily figure in September, and there has been a gradual reduction in demand for currency and a recovery in supply. Therefore, following the introduction of managed exchange rate flexibility, the NBU sees no grounds for concern but has tools at its disposal for prompt response if necessary.

At the same time, Andriy Pyshnyy noted the necessity of repatriating foreign currency earnings obtained from exports. In this regard, the National Bank is taking measures to strengthen banks’ compliance with currency controls and is engaging in relevant communication with the State Tax Service of Ukraine.

In the future, the regulator plans to gradually increase the flexibility of the foreign exchange market. However, this will only happen when proper macroeconomic conditions are in place to avoid shocks to the foreign exchange market and the economy.

The NBU’s plans include gradually easing currency restrictions on the repatriation of dividends and interest payments on loans. Discussions on these matters are ongoing between the NBU and the IMF, and it is important to take into account the business community’s perspective regarding the prioritization of these relaxations.

Currently, the NBU is developing a strategy for credit recovery, which will soon be presented and discussed with the business community. Additionally, the National Bank is actively negotiating with the EBRD and the World Bank to develop mechanisms for insuring military risks. Existing concepts need to be refined to formulate a comprehensive model for insuring military and political risks, upon which a systemic program for post-war recovery in Ukraine will be built.

On behalf of the European Business Association, we sincerely thank the NBU team for their ongoing dialogue with the business community, professionalism, openness, and we genuinely hope for further cooperation!