The growth of the dollar against the hryvnia at the end of May - early June took an intermittent character, during May 28 - June 5 it grew by almost 90 kopecks, from UAH 26.32 to UAH 27.20, according to the National Bank of Ukraine (NBU) rate.
However, the growth rate itself should not be perceived as a tragedy, especially since in the summer of 2018 the dollar overcame the mark of 27 UAH. Today, the National Bank and commercial banks strengthened the hryvnia by more than 20 kopecks.
Nevertheless, the devaluation of Ukraine’s national currency over the week caused serious unrest, especially in the midst of some internal instability – early parliamentary elections, the confrontation between the president and the MPs, talks of default, etc.
Who’s responsible – the oligarchs or the bankers?
Anyway, the growth of the dollar over the week by 90 kopecks cannot just happen, and domestic economists, agreeing that the cause was the crisis in the Ukrainian securities market (bonds of external and internal government loans), offer two options for an explanation.
Serhiy Fursa, a specialist in the sales of debt securities of Dragon Capital, believes that hryvnia devaluation was caused by the “advice” of businessman Ihor Kolomoysky to President Zelensky to declare a default. Although the president himself officially rejected this advice, in practice, previously acquired Ukrainian government bonds were sold and the interest in buying new ones was lost.
Ukrainian economic expert Oleksiy Kushch states that the reason for the hryvnia devaluation is a financial policy of the NBU and the Ministry of Finance to artificially curb the exchange rate.
The NBU constantly “sterilizes” the financial system of the country, withdrawing the “extra” hryvnia mass from it. This is usually done with two tools: depositary certificates and the base refinancing rate. By offering depositary certificates at 16% per annum, the National Bank actually guarantees banks a high and stable profit, which encourages banks to give money to the state, rather than bring it to the market. The NBU rate for banks is 17.5%, which is one of the largest indicators in the world. The Ministry of Finance makes its contribution in a form of 3- and 6-month bond certificates under 20% per annum. As a result, destructive international speculative financial capital rushed into Ukraine, having brought into the country several billion "extra" dollars."
As Oleksiy Kushch explains, billions of dollars, which come in the form of funds acquired from the sale of government bonds, allowed the dollar to exceed its supply over its demand and stabilize the exchange rate. However, this is not the currency earnings of exporters, which most often remain in the country. The money for the securities will inevitably be withdrawn from the country for new speculations, which will already cause a shortage of foreign currency and, as a result, the devaluation of the hryvnia, which happened at the beginning of summer.
What will happen to the dollar this fall?
Experts call panic on the securities market the key reason for the hryvnia devaluation. They believe that a global dollar leap would not occur until the autumn, and the projected “currency corridor” for the dollar will be UAH 27-28 before the end of summer.
Fursa believes that the situation in the financial market should be relatively stable until the autumn, if Ihor Kolomoysky does not blow it up again, for example, by a decision on monetary compensation for the illegal nationalization of Privatbank. Thus, a “hole” would be formed in the state budget.
However, this very "hole" would appear in December due to a deficit of $ 3 billion. And an agreement with the International Monetary Fund is not reached, no one will be able to predict the rate of the national currency in 2020. The possibility of an agreement will greatly depend on the results of early parliamentary elections, the creation of a coalition, the government and the adoption of the new laws.
Economic expert Oleksandr Okhrimenko also expects an inevitable devaluation of the hryvnia in the fall, since in the summer Ukraine will have to pay back $ 1.8 billion in foreign debts and another $ 1.7 billion in September. According to Oleksiy Kushch, summer will be relatively stable, and the dollar will fluctuate in the range of 27-28 UAH. Actually, in his opinion, the rate of 28 UAH for 1 dollar is economically justified, and it fully corresponds to the current state of the Ukrainian economy. Everything can change in the fall, when new factors come into force: political stability after parliamentary elections, the start of agricultural exports and the flow of currency from farmers, the stability of foreign financial markets, etc.
As the events of June 5 showed, the next currency panic in Ukraine begins to subside. The National Bank of Ukraine immediately responded to the market's behavior: on June 5 the official rate was UAH 27.20 per $ 1, on June 6 this figure immediately fell by 27 kopecks - up to 26.93 UAH for $ 1.