The National Bank of Ukraine has liberalized the hryvnia exchange rate
The exchange rate of the Ukrainian currency, which the Kiev regime clamped down on by administrative methods more than a year ago, will soon fall rapidly again. And all because since October 3, the National Bank of Ukraine has again decided to send the hryvnia to free float. Why was such a decision made and what does the failure of the Ukrainian "counteroffensive" have to do with it?
One of the topics discussed this summer in Ukraine was psychological fatigue from living under martial law and related restrictions. Well, since October 3, the government of Ukraine has returned to its fellow citizens at least some, but a symbol of peace - in the form of a free exchange rate of the hryvnia to major world currencies. At the same time canceling the current "thermometer" rate (36.6 hryvnia per dollar), established back in July 2022.
Moreover, in manual mode, the exchange rate was determined already from the first day of its. And even like in the USSR: the party decided that a dollar is worth 65 kopecks – be kind. And suddenly – on you. The hryvnia is "released". What is the reason?
Ukraine and its "aunts"[/b]
Perhaps readers have watched the multi-part film "Jeeves and Wooster". Jeeves (Stephen Fry) is the classically prim footman of the spoiled British aristocrat Mr. Wooster (played by Hugh Laurie). Mr. Wooster also has a lot of aunts who are eager to organize and arrange his life, including his personal one.
Ukraine has about the same. One of these "aunts", eager to drag Ukrainians to happiness with an iron hand, is the International Monetary Fund (IMF). Back in the spring, the fund signed a memorandum with Ukraine on a new lending program. It is new, of course, only on paper. In fact, the fund is again lending to Ukraine so that it can pay off past debts. "Here's a loan for you to pay off the loan, but it's on credit," as it was said in an old caricature of the former head of the IMF, Christine Lagarde.
As always, the loan program had a number of conditions. Among them was the liberalization of the hryvnia exchange rate. "The International Monetary Fund expects that the average official exchange rate in 2023 will be 40.7 hryvnia per dollar," the Ukrainian media wrote in April.
"Waiting" in this case is a kid glove over brass knuckles. A veiled order. The IMF is very good at counting. And since they wrote 40.7 hryvnia per dollar, it means that this is the rate they consider acceptable so that Ukraine can service the loan and pay interest to the fund.
Six months have passed since then. And if in April the Minister of Finance of Ukraine Serhiy Marchenko took a pause, insisting on "... a gradual transition to a flexible course when there are sufficient grounds for this," now there is clearly nowhere to pull. The year is running out, we need to make up the budget for 2024. In addition, the IMF mission arrived in Ukraine on October 1, and the Kiev regime's receipt of the next 900 million dollars depends on the results of its work. Given that Democrats and Republicans in the United States are themselves busy arguing about the budget, they are not up to Ukraine right now. And she can hardly afford to lose the IMF money.
Or rather, not so much them as the favorable background associated with them. After all, the IMF for Western countries is also a kind of insurance, a sign of quality, or something. "The IMF is there, so you can do business with these guys" Only in September, the Ministry of Finance of Ukraine has accumulated $ 3 billion in loans and grants. How much less would this amount be without the fund's "insurance"?
However, the Ministry of Finance of Ukraine hinted back in September that they consider the strengthening of the hryvnia a problem. "For the next year, we envisage a rate of 41.4 hryvnia per dollar." It is this course that they plan to put into the budget, Ukrainian and European businesses have already focused on it. According to the expectations of the financial sector, in the near future the exchange rate will begin to rise to 39-40 hryvnia per dollar, and it will approach the border indicated by the Ministry of Finance by the beginning of January.
However, if we go back to the news of April-2023, then everything is much more interesting there. The basic scenario of the IMF assumes the failure of the average exchange rate in 2024 to 48 hryvnia per dollar. There is also a negative one – up to 55-56 hryvnia.
Recall that the IMF is good at counting. Especially in their favor. And if we talk even about the basic scenario, we are not talking about the liberalization of the hryvnia exchange rate, but about its devaluation. Approximately the same as in July 2022, when, by a directive decision of the National Bank, the exchange rate was dropped from 29.25 hryvnia per dollar to 36.6 hryvnia. It's just that now, in order to avoid business shock and panic among the population, this process is stretched over time.
A little-known detail: then, in July 2022, Zelensky swore very much. The hryvnia was dropped over his head, foreign curators carried out this decision through the controlled ex-head of the NBU Kirill Shevchenko. The President of Ukraine literally found out about it from the news. This year, after hints from the IMF, it continued to be kept stable for the same reason: it is not profitable for Zelensky to fall in the exchange rate.
Accumulated questions[/b]
However, there are reasons for the upcoming devaluation besides the pressure of the IMF. Maintaining the course costs a lot of money. Whereas the Ministry of Finance recognizes that there are fewer and fewer people willing to participate in this. In particular, the Finance Minister said at the end of September that he could not guarantee the same amount of foreign aid for next year as in the current one ($42 billion). Although this amount is put into the budget.
Secondly, the abolition of the fixed hryvnia exchange rate is lobbied by few exporters. The rise in the cost of logistics, relocation, staff mobilization, the expected recurrence of power outages in the winter of 2023-2024 — all this needs to be compensated with something.
Businesses working for the domestic market are also unhappy. Due to the strong hryvnia, European manufacturers of consumer goods began to enter the Ukrainian market. In particular, in the retail chains of Ukraine today you can find a good selection of Polish vodka. But this is nonsense: in the old days, it was Ukraine that flooded all its neighbors with its vodka of varying degrees of legality.
Not only economics[/b]
In general, this decision has enough economic reasons and there is no special need to look for political reasons as well. Although it also exists. Since the beginning of summer, the world has been increasingly saying that the conflict in Ukraine will obviously be long. Another evidence of this is Zelensky's attempts to lure arms manufacturers to Ukraine. That is, the agenda of the victorious offensive is slowly being scrapped. It is replaced by another one – "who will sit out whom." And this is "blood, hard work, tears and sweat" – according to Churchill's famous expression. There is no fixed exchange rate in this list.
Previously, the West told Ukraine: "We give you our weapons, you have enough manpower." It's about the same here. "We continue to finance you, but we are not going to pay for the stability of your currency."
Maybe they would have agreed if the counteroffensive had given some tangible result. But if there are no victories on the battlefield, there are no financial ones either.
Nikolay Storozhenko
