The business met with representatives of the National Bank of Ukraine

29/ 07/ 2022

Today, the European Business Association held a meeting with the Governor of the National Bank of Ukraine Kyrylo Shevchenko and the Board of the NBU. It was about monetary and currency policy, recent changes and further plans of the regulator. Thus, according to Kyrylo Shevchenko, the war affected the budget - its deficit already amounts to almost UAH 432 billion. To prevent the collapse of state finances, the National Bank was forced to make an alternative decision to monetize the budget. If in the first months of the war it was possible to absorb the risks of monetary financing thanks to the safety margin accumulated over the previous years in the form of international reserves, the situation has changed since June. The volume of budget monetization increased significantly and this caused excessive pressure on foreign exchange reserves, as well as negatively affected inflationary expectations. In order to curb the negative impact of budget monetization, the National Bank switched to a tight monetary policy in June. In addition, the NBU intends to reduce the financing of the budget deficit already in the second half of 2022 and gradually minimize it in the future. Another topic of discussion between representatives of the NBU and business was the state of the banking sector. According to the Governor of the NBU, the banking system quite successfully coped with the challenges in the first months of the war. He noted that a full-scale war would accumulate challenges for the banking system, but banks would have enough time after Victory to overcome them. The operative fixation of the exchange rate at the level of UAH 29.25 per dollar contributed to maintaining the stability of the banking system. At the same time, during these five months of full-scale war, the economy of Ukraine and the world underwent fundamental changes, in particular, the exchange rate of the dollar against other foreign currencies rose significantly. In such conditions, the National Bank established a new level of the fixed exchange rate of the dollar at the level of 36.6 hryvnias per dollar and introduced restrictions on payment cards and cash withdrawals. At the same time, in order to reduce the pressure on the cash market, the NBU allowed citizens to buy currency online for a deposit of three months or more. Some banks already offer such a tool, others are adjusting their functionality. Representatives of the NBU also reported that restrictions on corporate cards, limits on payments from corporate cards have been put into operation, and the regulator promises to work on options for solutions within a few weeks. At the beginning of the war, the National Bank of Ukraine temporarily suspended the publication of the Inflation Report due to high uncertainty. However, this week the bank renewed its publication. You can view it at the link. According to the NBU forecasts, due to the consequences of the war (the physical destruction of enterprises, the temporary occupation of certain territories, severed logistical connections, significant migration, etc.) in 2022, the countrys GDP will decrease by at least a third. At the same time, the economy will return to growth in 2023. The forecast does not take into account the possible restoration of grain exports by sea by the end of the year, as well as the implementation of an analogue of the Marshall Plan, since the parameters of the program are still uncertain. At the same time, the forecast takes into account the continuation of active international financial support for Ukraine to finance budget needs and closing balance of payments gaps, in particular, the successful implementation of a new program with the IMF during 2023-2024. Since the beginning of the war, Ukraine has received an unprecedented amount of aid - about 13 billion dollars. USA. At the same time, the amount received is not enough to cover the growing financial needs in wartime, not to mention the recovery of the economy. Therefore, the National Bank, together with the government, is working to increase international support. The EBA sincerely thanks the representatives of the National Bank of Ukraine for the professional dialogue and readiness to be constantly in touch with business. Of course, business understands the complexity of the situation in which the country found itself and the forced steps that the NBU had to take in such a situation. At the same time, we sincerely hope that the policy of the regulator will continue to be balanced and take into account the interests of business, because it is business that keeps the economy going by continuing to work, investing, etc.

Today, the European Business Association held a meeting with the Governor of the National Bank of Ukraine Kyrylo Shevchenko and the Board of the NBU. It was about monetary and currency policy, recent changes and further plans of the regulator.

Thus, according to Kyrylo Shevchenko, the war affected the budget – its deficit already amounts to almost UAH 432 billion. To prevent the collapse of state finances, the National Bank was forced to make an alternative decision to monetize the budget.

If in the first months of the war it was possible to absorb the risks of monetary financing thanks to the safety margin accumulated over the previous years in the form of international reserves, the situation has changed since June. The volume of budget monetization increased significantly and this caused excessive pressure on foreign exchange reserves, as well as negatively affected inflationary expectations.

In order to curb the negative impact of budget monetization, the National Bank switched to a tight monetary policy in June. In addition, the NBU intends to reduce the financing of the budget deficit already in the second half of 2022 and gradually minimize it in the future.

Another topic of discussion between representatives of the NBU and business was the state of the banking sector. According to the Governor of the NBU, the banking system quite successfully coped with the challenges in the first months of the war. He noted that a full-scale war would accumulate challenges for the banking system, but banks would have enough time after Victory to overcome them. The operative fixation of the exchange rate at the level of UAH 29.25 per dollar contributed to maintaining the stability of the banking system.

At the same time, during these five months of full-scale war, the economy of Ukraine and the world underwent fundamental changes, in particular, the exchange rate of the dollar against other foreign currencies rose significantly. In such conditions, the National Bank established a new level of the fixed exchange rate of the dollar at the level of 36.6 hryvnias per dollar and introduced restrictions on payment cards and cash withdrawals. At the same time, in order to reduce the pressure on the cash market, the NBU allowed citizens to buy currency online for a deposit of three months or more. Some banks already offer such a tool, others are adjusting their functionality. Representatives of the NBU also reported that restrictions on corporate cards, limits on payments from corporate cards have been put into operation, and the regulator promises to work on options for solutions within a few weeks.

At the beginning of the war, the National Bank of Ukraine temporarily suspended the publication of the Inflation Report due to high uncertainty. However, this week the bank renewed its publication. You can view it at the link.

According to the NBU forecasts, due to the consequences of the war (the physical destruction of enterprises, the temporary occupation of certain territories, severed logistical connections, significant migration, etc.) in 2022, the country’s GDP will decrease by at least a third. At the same time, the economy will return to growth in 2023. The forecast does not take into account the possible restoration of grain exports by sea by the end of the year, as well as the implementation of an analogue of the “Marshall Plan”, since the parameters of the program are still uncertain.

At the same time, the forecast takes into account the continuation of active international financial support for Ukraine to finance budget needs and closing balance of payments gaps, in particular, the successful implementation of a new program with the IMF during 2023-2024. Since the beginning of the war, Ukraine has received an unprecedented amount of aid – about 13 billion dollars. USA. At the same time, the amount received is not enough to cover the growing financial needs in wartime, not to mention the recovery of the economy. Therefore, the National Bank, together with the government, is working to increase international support.

The EBA sincerely thanks the representatives of the National Bank of Ukraine for the professional dialogue and readiness to be constantly in touch with business. Of course, business understands the complexity of the situation in which the country found itself and the forced steps that the NBU had to take in such a situation. At the same time, we sincerely hope that the policy of the regulator will continue to be balanced and take into account the interests of business, because it is business that keeps the economy going by continuing to work, investing, etc.