The hryvnia's latest decline, which began three weeks ago and continues today, is due to several factors.
Former Deputy Governor of the National Bank of Ukraine Oleksandr Savchenko spoke about this at a press conference at Glavkom, reports NewsOboz.org.
"The National Bank, together with the government's economic bloc, made several erroneous decisions. The most important of these was the public announcement of the issuance of domestic government bonds to recapitalize Naftogaz, worth approximately UAH 50 billion. After this information became public, the exchange rate began to plummet. Both businesses and the public understand that such an overt issue will lead to a depreciation of the hryvnia," he noted.
According to him, circumstances are such that the only way to save the situation, including at Naftogaz, is by issuing hryvnia, as there are no funds in the budget for recapitalization.
"The lack of professionalism is astonishing – the issue should have been spread out over several months, identifying the right moments to do so, and not making such public statements," Savchenko said.
He identified the authorities' second mistake: "When the hryvnia began to stabilize and strengthen (we're talking about 0,5-1%), the NBU entered the market and began buying up hryvnia. In other words, it made it clear that it opposed strengthening the hryvnia."
The third mistake, according to Savchenko, is that the National Bank's leadership has yet to master the instruments of capital control. "We're talking about the non-return of foreign currency earnings and fictitious import contracts through which capital flees. In Ukraine, theoretically, capital movement without the National Bank's consent is prohibited, but in practice, no country in the world has worse capital controls than Ukraine," the former deputy governor said.
He also called the decision to sell 100% of foreign currency proceeds a mistake. He said this accelerated the outflow of capital from Ukraine.
Savchenko called the introduction of taxation on currency sales "a very grave mistake." "Essentially, it's an export tax. It encourages a reduction in exports and the conduct of transactions outside of Ukraine," he said.
"The next reason is the opaque refinancing, or rather, the emission, of commercial banks. Where did the 33 billion in commercial banks' correspondent accounts come from? The money is received not by the system, but by a specific bank. Why this happens is a separate question. The banks that receive the most hryvnia are the ones that access the foreign exchange market and buy foreign currency. For example, there are banks that approach the NBU and justify their need for 1 billion hryvnias. This was three weeks ago, when the exchange rate was around 11,5. Such a bank received the funds, went to the foreign exchange market, and bought foreign currency at that rate. Today, it can sell the currency at 14. During this time, it would have earned approximately 250 million in net profit from operations. This is another reason for the sharp fluctuations in the exchange rate," Savchenko noted.
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