22 Jul 2022 09:18

Hryvnia devaluation: additional revenues and problems

MOSCOW. July 22 (Interfax) - Ukrainian Finance Minister Serhiy Marchenko praised the National Bank's decision to devalue the official exchange rate of the hryvnia by 25% to a new fixed level of UAH36.5686/$1.

"We expect that the increase of the exchange rate will enable us to collect an additional UAH5.3 billion per month at customs," Marchenko said during a national telethon on Thursday, Ukrainian media reported.

"And considering that we are rescheduling payments on debt principal and interest, our burden of external payments is negligible, so this decision is of a positive nature for us," Marchenko said.

The National Bank of Ukraine (NBU) raised the U.S. dollar's official exchange rate against the hryvnia as of 9:00 a.m. on Thursday, while the official exchange rates of other currencies against the hryvnia will be raised on Friday in line with their cross rates against the dollar.

NBU deputy governor Serhiy Nikolaychuk said at a briefing on Thursday that the hryvnia's devaluation by 25% to UAH36.5686/$1 will put a limited, 2-3 percentage points of pressure on consumer prices, as its impact on higher prices for imports will be partial, Ukrainian media reported.

Imported goods make up about a third of the consumer basket, but their price growth with the new official exchange will be curbed partly by narrower margins for importers, partly by already factored-in devaluation expectations and partly by imports for cash foreign currency, the exchange rate of which was already at the level of the new official rate, Nikolaychuk said.

He said higher prices for fuel will account for 0.6-0.8 pp of the 2-3 additional pp of inflation. "This has already been factored into the new macro forecast," Nikolaychuk said.

It was reported earlier that the NBU expects inflation to accelerate to 31% this year and slow to 20.7% next year. Inflation in Ukraine accelerated to 10% in 2021 from 5% in 2020 and 4.1% in 2019, while core inflation accelerated to 7.9% in 2021 from 4.5% a year earlier.

Annual inflation accelerated to 21.5% at the end of the first half of 2022 from 18% at the end of May, 16.4% at the end of April, 13.7% at the end of March, 10.7% at the end of February and 10% at the end of January.

Ukrainian media also reported that Raiffeisen Group banks in Austria, Slovakia, Hungary and the Czech Republic will stop exchanging cash hryvnia for foreign currency as of July 25 due to the NBU's ban on commercial banks buying cash hryvnia from foreign financial institutions.

The bank's press service said on Thursday that Ukrainians abroad exchanged UAH1.1 billion in cash for local currency at Raiffeisen Group branches while the service was available.

Ukraine's Raiffeisen Bank (formerly Aval), which was founded in 1992, was the fourth largest by assets of the country's 69 operating banks as of May 1, with UAH144.27 billion. Its largest shareholders as of January 1, 2022 were Raiffeisen Bank International with 68.1329% and the European Bank for Reconstruction and Development with 30%.