In 2023, the Central Bank may decide to abandon the fixed exchange rate in the interbank foreign exchange market. However, this requires certain economic prerequisites.
The most important condition for exchange rate stability is the Central Bank of Ukraine to fix the exchange rate. Without the fixed exchange rate in 2022, the devaluation of the hryvnia would be much deeper than 36.57 UAH/USD. – the rate of the interbank market determined by the regulator. writes about it Focus Fluctuations are inevitable How and why the exchange rate will change in 2023.
“The exchange rate of the interbank market is rigidly fixed, so fluctuations (supply and demand) do not affect the price dynamics. This type of fixation helps the country save significantly on imports, which have become the main source of essential goods (including military goods) in the country. And a strong hryvnia is needed as the low dollar holds back export gains. Under a floating exchange rate, the burden will be significantly greater, as will inflation.“, – says financial analyst Andriy Shevchishin.
As for 2023 and the possibility of freeing the exchange rate, experts still doubt the viability of such a scenario. “The main factor in the National Bank’s decision on the exchange rate regime remains the market’s ability to self-regulate the exchange rate. But so far, this possibility has been rather limited due to the military situation and the presence of significant geopolitical risks. Therefore, in our view, the transition to a floating exchange rate will be possible only after the end of active hostilities or a significant reduction in their intensity, when the Central Bank is able to ease the currency restrictions, which will become a prerequisite. Transition to a more flexible exchange rate.“, – says Sergey Kolodiy, managing director of macroeconomic analysis at Raiffeisen Bank.
German Marchenko, head of ComInBank’s treasury division, said: A return to a floating exchange rate requires the application of several important military and economic conditions.
These conditions include:
- Minimum inflation not exceeding 1-1.5% per month;
- The budget deficit is not only possible thanks to the macro-financial aids from the EU, the USA and international financial institutions, but also with the resumption of medium and large-scale enterprises with export revenues (grain, metal, etc.) to the budget;
- General GDP growth of up to 5-7% per year (3% GDP growth forecast for 2023);
- Achievements of the Armed Forces of Ukraine: stopping the destruction of infrastructure, the transition to large-scale restoration of the country, the liberation of occupied territories.
Vitaly Shapran, economist and member of the Association of Financial Analysts, is sure: As long as there is war in Ukraine, the rate will remain constant.
Recall, in early December, the head of the NBU Andriy Pyshny said that the National Bank can abandon the fixed hryvnia exchange rate.
As reported, in October the NBU was headed by financier Andrey Pyshny, and the former head of Kirill Shevchenko was dismissed by parliament.
Source: Focus
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