Individual permits risky for easing currency restrictions in Ukraine - NBU
MOSCOW. Aug 7 (Interfax) - The National Bank of Ukraine (NBU) understands the problems faced by businesses due to the current limits on external currency transfers, but still considers gradual lifting of restrictions for all to be preferable to issuing individual permits.
"The NBU understands the problems faced by business entities due to the current currency restrictions [...]. Granting individual permits to individual companies, however, will require the spending of the country's limited resource, which may significantly undermine the National Bank's ability to form prerequisites for easing currency restrictions for all," the bank said in response to a request from Ukrainian media.
The NBU said that the Memorandum on Economic and Financial Policies under the fourth review of the Extended Fund Facility (EFF) with the International Monetary Fund (IMF) stipulates that the NBU's decisions on granting individual authorizations should be consistent with the Strategy and objectives of ensuring macroeconomic, financial and external stability, and will be taken in cases of exceptional importance for the state during martial law.
"Given this, the National Bank will decide on further steps to relax currency restrictions taking into account their phasing in line with the Roadmap, as well as in compliance with the fundamental principles of the Strategy and only when the proper prerequisites for their implementation are provided," the NBU said.
The bank added that the current situation in the Ukrainian economy and on the financial markets requires considerable deliberation when making decisions that may affect macroeconomic stability.
"The NBU is consistent in pursuing its policy aimed at balanced decision-making based on a comprehensive analysis of the impact of relevant operations on the state of the monetary market, including the level of Ukraine's international reserves," it said.
"On the one hand, this is essential to maintain a balance in meeting the priority needs of the country's economy, and on the other hand, to prevent a breach of balance on the monetary market," the National Bank said.
The bank said that it gave businesses the opportunity to repay overdue interest payments as of May 1, 2024 within the quarterly limit of 1 million euros, while all future scheduled payments can be repaid without restrictions on the amount.
Additionally, "new" dividends on corporate rights or shares abroad accrued based on performance in the period beginning on January 1, 2024 are allowed to be repatriated partially, up to 1 million euros per issuer.
Along with these measures, as of July 11, 2024, it is permitted to transfer funds from Ukraine for payment of dividends by a resident legal entity in excess of the amounts permitted to do so, provided that these funds are ultimately used to make scheduled payments of interest income (coupons) on Eurobonds issued by a related non-resident.
As reported, the government issued 15 orders dated February 6 and February 13 to adopt requests to the NBU to allow companies from the groups of VF Ukraine, DTEK, Metinvest, Interpipe and Kernel to make payments from Ukraine on Eurobonds and other obligations to external creditors. The attached documents noted, among other things, that such decisions would help maintain investors' trust, save the companies, many of which are major exporters, foreign currency funds and ensure their more efficient and sustainable operations in the future. According to analysts' calculations, the total amount of the requests is over $1.8 billion.
The NBU said in response to a request from the media that it had taken these requests into account and would consider each of them separately.
At the same time, IMF Mission Chief for Ukraine Gavin Gray sent a letter to the Ukrainian authorities, in which he doubted that such an individual approach is in line with the strategy of easing currency restrictions approved by the National Bank last summer in fulfillment of its EFF commitments. The IMF is also concerned about the relatively large amount of possible payments and the possible impact of such decisions on Ukraine's upcoming negotiations on restructuring sovereign Eurobonds with commercial creditors.
In July this year, Ukraine's net international reserves (NIR) dropped $3 billion to $23.30 billion, the National Bank said. At the same time, according to the quantitative performance criterion (QPC) in the updated EFF, Ukraine's NIR should reach at least $28.8 billion at the end of September this year, and at least $26.3 billion at the end of the year.
Overall, Ukraine's international reserves in July, according to the NBU's preliminary estimates, fell 1.8%, or by $572.3 million, to $37.231 billion.