17 Apr 2023 14:44

Bank of Ukraine governor: More flexibility in administrative restrictions, foreign exchange policy not expected anytime soon

MOSCOW. April 17 (Interfax) - The National Bank of Ukraine (NBU) will meet the deadline in implementing the relevant structural benchmark listed in the cooperation program with the International Monetary Fund (IMF) by developing a foreign exchange liberalization strategy by the end of June 2023 and gradually lifting administrative restrictions, although an actual transition to this strategy is not expected anytime soon, NBU Governor Andrei Pyshny said.

"The market is being balanced these days exclusively due to the National Bank's presence, and the problem of unprecedented current account balances remains relevant. We're working on that and see some progress, but it's too early to speak of any results. Hence, a transition to more flexibility in this aspect is not a matter of the near future," Pyshny said in an interview with Ukrainian media in Washington.

In working on the liberalization strategy, the NBU is deliberately declining to say when exactly the policy would be reviewed, he said.

"It is not a date that determines the lifting of administrative restrictions, and everything will depend on when the essential preconditions are formed. And we're openly communicating [to decide] what preconditions would give us reasons to speak of introducing a floating exchange rate and resuming the free movement of capital," he said.

These preconditions imply the binding of the current liquidity surplus, which is distributed unevenly and is mainly concentrated on demand accounts, he said.

"In switching to gradually easing administrative restrictions and before introducing elements of a flexible exchange rate, we should make sure that this liquidity overhang won't undermine the exchange rate's stability," Pyshny said.