HRYVNIA MARKS JUBILEE
On August 29 Ukraine celebrated yet another jubilee — five years since the introduction of the nation’s currency. National Bank of Ukraine Deputy Governor Yaroslav Soltys noted at the press conference, “The introduction of the hryvnia in circulation became a turning-point in the development of Ukraine.” In his view, it was during the hryvnia period that inflation dropped, exports increased, and other economic indicators improved. “The blow of the transition period with its inevitable inflation and devaluation had been taken by the coupon and karbovanets currencies then in circulation,” he stressed. Interestingly, during the exchange of this interim currency for hryvnias, Ukrainians turned in about 327 trillion coupons. As emphasized by Mr. Soltys, “This year the Ukrainian hryvnia is among the world’s most stable currencies.” Its present stability, however, is somewhat relative. Suffice it to mention that neither the NBU nor the Finance Ministry dare to predict hryvnia’s stability in the future.
Simultaneously, NBU Governor Volodymyr Stelmakh told The Day, “At present the hryvnia is growing stronger both nominally and in real terms. Paradoxically, the NBU is currently taking steps to curb the hryvnia’s strengthening. We do not want the currency’s rise to get out of control and are buying surplus supply of currency on the markets. This year, the NBU’s hard currency reserves for the first time topped Ukraine’s external debt by about $400 million US. Still, each day the market closes down, with the hryvnia rising... This is evidence of improvements both in foreign trade and in industry, with exports growing by 20% and imports by only 3%,” he asserted.
Meanwhile, Ukrainian politicians are far from unanimous in their estimates of the hryvnia’s optimum exchange rate. Finance Minister Ihor Mitiukov, although positively assessing the strengthening of the national currency, notes that he is concerned over the possible inadequacy the dynamics to realities. While State Tax Administration Head Mykola Azarov said that if the hryvnia slides to 5.7 to one US dollar it would earn the budget additional UAH 1.6 billion.
Stelmakh commented on such assumptions, saying, “The hryvnia exchange rate should be stable and stimulate domestic market, investment market, etc. Our task here is to secure the stability. But not everything can be regulated by the exchange rate. The tax authorities are to resort to sound administrative measures. They think that they will collect 1.5 billion more in taxes if the rate is 5.7, while for the five months alone tax arrears have grown by more than UAH 4 billion. We must be fully aware of the negative impact hryvnia devaluation will have. Such issues need a balanced approach,” he noted.
