The easing of currency restrictions in Ukraine, the return to a flexible exchange rate and inflation targeting will take place gradually, only if the appropriate prerequisites are formed – this approach will minimize the risks for the stability of the foreign exchange market, lower inflation and economic recovery.
This is stated in strategies for easing foreign exchange restrictionsthe public version of which was published by the National Bank.
The specified public version describes the priorities and principles for the implementation of steps in these areas, but only in general terms.
According to the document, the implementation of the strategy will be carried out gradually, only when stable prerequisites are formed and after a proper analysis of the potential impact, as well as the effectiveness of previous steps.
At each stage of the implementation of the strategy, the National Bank will ensure sufficient attractiveness of hryvnia assets.
“This approach will minimize the risks for the stability of the foreign exchange market, lower inflation and economic recovery,” – note in the NBU.
“Easing foreign exchange restrictions and a gradual increase in exchange rate flexibility in the future will increase the ability of the economy to adapt to changes in external and internal conditions. In addition, this will restore the effectiveness of monetary transmission channels and strengthen the NBU’s ability to simultaneously ensure price and financial stability, as well as sustainable economic growth in the long term “, – the message of the National Bank says.
It is noted that the implementation of the Strategy will be determined not by time frames, but by the formation of appropriate macroeconomic prerequisites.
Attention, in particular, will be paid to assessing the development of such key parameters:
inflation and inflation expectations; the level of international reserves and the stability of the foreign exchange market; interest rates (including a positive level of the discount rate in real terms and the attractiveness of hryvnia instruments); parameters of financial stability.
At the same time, the National Bank speaks of “an exceptionally high uncertainty associated with the war.” In this regard, the strategy provides that in case of intensification of risks, the implementation of the next steps or the cancellation of the previous steps of the strategy may be suspended in order to maintain macroeconomic and financial stability.
The development of the strategy in the National Bank is explained by the need for a gradual easing of restrictions, and in the long term – a return to the traditional format of inflation targeting with a floating rate.
“The formed appropriate prerequisites and the positive result of the analysis have already allowed the NBU to ease a number of currency restrictions in June. At the same time, the prerequisites for the implementation of the next steps from the strategy are still being formed,” the National Bank noted.
Reminder:
On June 29, 2023, the Board of the NBU approved the relevant strategy by completing a structural beacon under the extended financing program with the IMF.
Thus, in accordance with the Memorandum on Economic and Financial Policy with the IMF, one of the structural beacons for the program was the preparation by the end of June 2023 of a strategy for the transition to a more flexible exchange rate regime, easing foreign exchange controls and returning to inflation targeting.
At the same time, the terms for the implementation of the relevant strategy are not provided for by the Memorandum, since everything will depend on the formation of the appropriate prerequisites.
The development and implementation of the strategy is also aimed at fulfilling the provisions of the Basic Principles of Monetary Policy for the period of martial law, approved by the NBU Council in April 2022. They provide for a gradual return to inflation targeting, because this regime allows for the simultaneous achievement of the NBU’s goals of price and financial stability and support for sustainable economic growth in the long term.
2023-07-11 12:27:46
#National #Bank #published #public #version #strategy #easing #foreign #exchange #restrictions
