National Bank of Ukraine lifts restrictions on import of works and services, repatriation of new dividends
MOSCOW. May 6 (Interfax) - The National Bank of Ukraine (NBU) announced a large package of measures to ease foreign exchange restrictions for companies in order to improve business conditions in the country and allow entry into new markets, and which would support economic recovery and facilitate the influx of new investments.
"Firstly, all currency restrictions for the import of works and services are abolished. Secondly, the opportunity for businesses to repatriate "new" dividends is ensured. Thirdly, the opportunity is provided to transfer funds abroad under leasing/rental agreements," Ukrainian media reported, citing an NBU press release.
In addition, restrictions on the repayment of new external loans are being relaxed and the opportunity to repay interest on "old" external loans has been provided. Restrictions on the transfer of foreign currency from representative offices in favor of their parent companies are being relaxed.
The National Bank said that these and a number of other technical changes were made by resolution of the NBU board on May 3, 2024. The vast majority of the provisions of the document come into force on May 4, while the provision regarding the repatriation of new dividends enters force on May 13, 2024.
With the removal of all restrictions on the purchase and transfer of foreign currency by businesses abroad for operations related to the import of works and services, the previous resolution of the Cabinet of Ministers from February 24, 2022 becomes invalid, and the National Bank will therefore refer it to the government for proposed cancelation, the press release said.
"In addition, the NBU has separately provided the opportunity for businesses to buy foreign currency and transfer funds abroad to pay airport and port taxes, fines, and membership fees. This is due to the fact that the above-mentioned government decree also, in part, refers to those types of transactions," the NBU press release said.
The regulator believes this will support Ukrainian producers and provide them with the opportunity to enter foreign markets, which in turn will contribute to a gradual increase in export earnings to Ukraine.
Repatriation of dividends by businesses will only be allowed for dividends accrued based on performance results after January 1, 2024. "This mitigation does not apply to the payment of dividends from retained earnings for previous periods or reserve capital," the National Bank said.
In addition, the regulator set a monthly limit for the repatriation of "new" dividends at the equivalent of 1 million euro in order to minimize risks to macro-financial stability.
As for easing restrictions on servicing and repaying "new" external loans and repaying "old" ones, the NBU reduced the minimum period for using a loan, funds for which are received from abroad after June 20, 2023 to the accounts of residents, from three to one year, upon reaching which it is allowed to buy foreign currency to repay it. Thus, the ban on the purchase of foreign currency to repay "new" loans will apply to loans for a period of up to one year.
In addition, the NBU will allow businesses, regardless of the period of use of "new" loans, to buy foreign currency to pay interest on them.
"All this will help increase the ability of Ukrainian businesses to attract new external loans not only from official partners, but also from private investors," the press release says.
Moreover, resident borrowers will be able to make transfers in foreign currency to repay interest on "old" external loans, which are payable as of February 24, 2022 per existing agreements, the release says. However, as far as interest payments on agreements overdue as of May 1, 2024 are concerned, borrowers will be able to transfer no more than 1 million euro in equivalent per calendar quarter.
This limitation will not apply to future scheduled interest payments. However, additional conditions are provided for these operations to protect macro-financial stability. Among them are the absence of overdue debt under the relevant loan agreement as of February 24, 2022, a ban on the purchase and transfer of funds through loans or loans from residents, the absence of the possibility of early fulfillment of payments or restructuring of overdue payments.
"These changes will minimize the likelihood of defaults by Ukrainian borrowers and provide more favorable conditions for the restructuring of external loans, as well as improve conditions for attracting new capital to Ukraine," the National Bank said.
In addition, legal entities and individual entrepreneurs will be able to transfer funds abroad for payments under leasing or rental agreements without additional restrictions regarding the subject of the agreement, as well as the date of its conclusion, the press release says.
The National Bank said that this permission previously only applied to the leasing or rental of vehicles.
"These changes will also allow businesses to pay off previously concluded leasing/rental agreements, which will actually make it possible to conclude new agreements and attract the necessary equipment to Ukraine to conduct business activities," the regulator said.
As far as permission for representative offices of foreign companies to transfer currency to the accounts of parent structures is concerned, it was clarified that the NBU will provide the opportunity to international card payment systems and foreign airlines to buy and transfer foreign currency abroad to the account of a non-resident legal entity, however, a monthly limit will be set at 5 million euro equivalent for these operations.
This will contribute to the further development of non-cash payments in Ukraine, the NBU said.
Head of the NBU, Andrei Pyshny, announced plans for currency liberalization as part of the strategy for easing currency restrictions agreed upon with the International Monetary Fund on April 25.
Thanks to the receipt of record external financing of almost $9 billion in March, Ukraine's international reserves increased 18% or $6.7 billion that month to $43.8 billion.