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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

How will the hryvnia revaluation affect your business?

3 June, 2008 - 00:00

The recent revaluation of the hryvnia will directly affect only a proportion of Ukrainian citizens: those who have savings. However, down the road the measures adopted by the National Bank of Ukraine are likely to cause repercussions (not necessarily negative one) that will affect enterprises and businesses. The Day queried its experts about possible developments.

Oleksii KRUTYBICH, head of the supervisory board at the Ukrros Sugar Union:

“On the positive side, if we have taken out foreign- currency loans, the price of sugar will not change. But a host of purely Ukrainian factors also come into play. The gas we consume comes from abroad, but it is not clear yet whether it will cost us less. Furthermore, prices for mineral fertilizers have not gone down, even though most fertilizers are produced in Russia and Belarus. So at the moment I cannot say that there will be any special changes. In the grand scheme of things, they depreciated the dollar instead of revaluating the hryvnia. Hryvnia prices have stayed at the same level while goods purchased with dollars have supposedly become cheaper because of the new hryvnia exchange rate. What business really needs is stabilization rather than currency revaluation.”

Volodymyr SLABOVSKY, president of the All-Ukrainian Bakers Association:

“The hryvnia revaluation is good for any company on the domestic market that neither exports nor imports machinery and/or ingredients, meaning that the dollar value of its sales volume will go up. This is advantageous for us. The revaluation will adversely affect exporters by cutting into their profitability.”

Yurii MAIBORODA, director of Fava-Technics Ltd.:

“Any changes, be it revaluation or devaluation of the currency, have an utterly negative impact on business. Business projects involve various countries and are based on fixed prices and fixed profit margins. If we gain, our partners lose, and vice versa. All this leads to such changes that sooner or later will force a business to shut down.

“I can give you an example of the revaluation of the Czech crown (korun), which took place several weeks ago. Our German partners have two plants in the Czech Republic that employ a lot of people and pay salaries in crowns. The crown exchange rate went up while the profit margin on finished products is 9-12 percent. What happened then? The German customers had to pay the difference out of their own pockets. After this move the company nearly went bankrupt. The government has set in motion a process that in three to four months will lead to a crisis in the country. People will see this after the harvest. In fact, the hryvnia has not become stronger; the currency reinforcement has been forced. If the hryvnia is stronger, all energy prices should go down, but here they are rising.”

Yurii LAPTII, president of the Chernihiv Construction Materials Plant:

“We are all accustomed to calculating production volumes in dollars. The dollar equivalent is what everyone has in mind, and this move will bring about a reduction in profits. First, this will directly lead to an increase in prices for construction materials. Second, for Ukrainian exporters this means an absolute fiasco because they will no longer be competitive on the world markets. Hence, they will put pressure on the domestic market by raising prices to offset their losses. At the end of this chain is the consumer, who will carry the entire burden. This is a new round of inflation that will lead to the bankruptcy of many enterprises and organizations.”

Dmytro HONCHAROV, head of the supervisory board of the Strakhovi Tradytsii Financial Group:

“This has not had an appreciable impact on our business because 99 percent of our assets are in hryvnias. Of course, if the hryvnia goes up, the foreign-currency value of our assets also increases. So, on the one hand, we have the feeling that we are now worth more. On the other, we have mixed feelings because of some bewilderment as to what has happened on the market. If the dollar cash exchange rate has dropped to 4.5 hryvnias and the next day it has increased to 4.8 hryvnias, one wonders who benefited and why did they need to do this? Generally speaking, a handful of speculators who were in the know have capitalized on this, and the entire country has lost out.”