The government will not intervene more than it has in the national currency rate and cause fluctuations, said First Deputy Prime Minister Serhiy Arbuzov during his press conference in Kyiv on March 19.
The
International Monetary Fund “does
not demand devaluation of the
hryvnia,
but the flexibility of the rate. The mission wants the
currency rate
to be formed by the market, but we are unable to do more
than
we are currently doing. Now the supply
is meeting the demand. We are not going to intervene.
The currency rate will be predictable
and clear, ” Arbuzov said.
However, Ukraine has already spent a lot to prevent devaluation of the hryvnia. Ukraine’s international reserves in December 2012 fell by 3.3% or by $830.71 million, to $24.546 billion, according to the National Bank of Ukraine. The government has also borrowed heavily on international markets to shore up its finances — and this year may be a record one, analysts predict.
This year, Ukraine must service $10 billion of external debt alone, $5.4 billion of which to the IMF. Earlier in the year, ratings agency Moody’s said that it deplored “deterioration in the country’s institutional strength, against the backdrop of poor policy predictability, as well as reduced data transparency.”
Interfax-Ukraine news agency reported earlier this month that Concorde Capital investment company’s Yuriy Tovstenko said that the government is likely to attract another $2-3 billion through the issuance of sovereign eurobonds and up to $2-3 billion through the placement of eurobonds by other borrowers.
The national bank’s stubborn peg to the dollar has
been a bone of contention between Ukraine and IMF, which insists
that
Ukraine will benefit from a floating hryvnia. The support of
the
hryvnia is one of the four longstanding issues in
negotiations with
the IMF, whose new mission is scheduled to arrive on March
27 to
continue negotiations on a new $15 billion loan.
“Since
2006-2007, we have been putting these recommendations
into our
reports. We believe that the Ukrainian economy, which
is deeply
integrated into the global economy and dependent on
exports of
exchange commodities, is exposed to volatility in the
market… We
believe that for an economy like this it would be much
better to have
a floating exchange rate,” IMF resident representative
in
Ukraine Max Alier said at the 7th annual Ukrainian
Banking Forum in
2012.
Arbuzov
says
that “the
forming of the rate is a
market process…There were panic moods and speculative
attacks when
we tried to intervene before. The correction of the rate
in the large
multi-million
(person)
country
is the very difficult
process.”
He
said
that the currency will be fluctuating in 2013 but “not
significantly.”
The average
2013 rate
projected
in
the 2013 state budget is Hr 8.4 per dollar,
weaker
than the current official rate of Hr
7.9 to
the dollar.
Arbuzov
said
that the government is pleased to see that Ukrainians
trust the
national currency.
“People start to trust the
national
currency more, savings in banks and the volume
of deposits
in
the
hryvnia
is growing,” he
said.
According
to the national
bank’s statistics, the volume of deposits grew by 4.2
percent in the
first two months of 2013, and reached Hr 381.4 billion
or $47 billion.
Kyiv
Post staff writer Svitlana Tuchynska can be reached at
[email protected].
