NBU unveils stages of strategy for easing forex restrictions
MOSCOW. July 10 (Interfax) - The National Bank of Ukraine has unveiled a public version of the strategy for easing restrictions, returning to a flexible exchange rate, as well as targeting inflation, Ukrainian media reported, citing the NBU.
Easing of currency restrictions will occur gradually, and "only when the appropriate prerequisites have formed," the NBU said
The first stage of the roadmap envisages minimizing multiple exchange rates, liberalizing trade operations, and facilitating new loans and investment.
The second stage envisages liberalizing trade finance, managing banks' forex risks, and the possibility of repatriating interest on "old" debt obligations and investments.
The third stage envisages the possibility of rendering payments on loans and investments, liberalizing households' transactions and transactions with derivatives, and the possibility of lending to non-residents and investing abroad.
"Easing forex restrictions will occur gradually, accounting for the above priorities, and it will be determined by forming the appropriate macroeconomic prerequisites rather than by time limits," the NBU said.
Although the roadmap establishes the sequence for easing forex restrictions, several steps could be implemented earlier or later than originally envisaged, particularly within the indicated stages. This could occur if there are conditions under which a deviation from the prescribed sequence would be determined to be more beneficial for the economy, the forex market, and the financial system.
The regulator noted that it would adhere to the general approach, by which removing the fixed exchange rate would precede a large-scale liberalization of capital flows. "For its part, increased exchange rate flexibility will be preceded by the relaxation of most forex restrictions on trading operations and restrictions that distort the functioning of the forex market owing to the plurality of exchange rates," the NBU said.
When implementing the strategy, the NBU plans to maintain tight monetary conditions by maintaining a sufficiently high level of real interest rates, which should ensure sufficient attractiveness of hryvnia assets, and thus minimize the risks to exchange rate stability in the event of waiving the fixing of the exchange rate regime and easing forex restrictions.
The NBU plans to focus on the dynamics of the following key parameters when taking decisions according to the strategy: inflation and inflation expectations; the level of international reserves and the stability of the forex market; interest rates; and the parameters of financial stability.