Last Friday, Deputy Prime Minister Serhiy Tyhypko announced that as of September 5 a new currency corridor of UAH 2.50-3.50 to the dollar will be introduced in Ukraine. The announcement comes before the IMF has taken a final decision on allocating the EFF loan to Ukraine.
“I have absolutely no doubt that the IMF will issue the loan to Ukraine,” Serhiy Tyhypko told The Day reporter Olha Len'. “In my view, it will improve the situation some but not much. The first tranche of the credit will arrive within the next few days, but its amount will be less than the Ukrainian government hoped for.”
Last Thursday night, trade at the Ukrainian Interbank Currency Exchange (UICE) was canceled until further special notice by the NBU. The official currency market is paralyzed.
This sharp turn of events was preceded by a quiet panic at the UICE, where the last few days trade was repeatedly delayed until late night. Dollar demand had regularly exceeded supply, and the dollar value was unofficially estimated at UAH 3-3.3. The President’s statement on expanding the currency corridor limits, made in the best traditions of the “responding-to-numerous-public-requests” style, and the open, alarming acknowledgment by the Premier that the IMF loan is our last chance, dealt a mortal blow to the currency market.
On the same day the official NBU exchange rate reached the upper limit of the old currency corridor-UAH2.25/USD1. Despite a warning from the NBU, exchange currency kiosks, which are all after buying as many dollars as possible, set the rate at UAH 2.46-2.47, while the black market rate ranged from 3.0 to 3.5 hryvnias per dollar.
The day before, NBU Governor Viktor Yushchenko said there was no sense in further spending NBU hard currency reserves to maintain the rate within the limits of the UAH 1.8-2.25/USD1 corridor (only the week before the NBU spent $170 million of its reserve on this).
According to unofficial information, at a closed meeting of parliamentarian faction and committee heads last Wednesday, Viktor Yushchenko presented emergency measures meant to cope with the financial crisis. Among them are hryvnia devaluation, renewal of the banking system, restrictions on the currency outflow from the country, and, what is especially interesting, introduction of a moratorium on paying domestic debts. In other words, Yushchenko alone has so far summoned enough courage to admit that a real financial crisis is breaking out in Ukraine. The rest of the government is still counting on the troubleshooter – the $2.2 billion EFF loan.
Deputy Governor of Russia’s National Reserve Bank Vyacheslav Yutkin told The Day that the NBU will be able to keep the hryvnia within the new corridor limits only a few months, after which it will go on the free market to sink or swim. Meanwhile, at sea are the country’s government, which is hoping for new loans; market participants, who are waiting for a decision on the new corridor; and the people, which have yet another chance to see that there is nothing more reliable than the good old dollar. The black market once again experiences a renaissance.






