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Dollar devaluation: What does this mean for Ukraine?

Author : Olexandr Honcharov

Source : 112 Ukraine

July 16, Ukrainian National Bank (NBU) strengthened the official hryvnia exchange rate against the dollar by 2 kopecks, setting it at the level of 25.74 UAH per 1 USD
16:15, 18 July 2019

Reuters

Now Ukrainian hryvnia is a “pre-election currency,” and how will the expected devaluation of the dollar affect Ukraine? July 16, Ukrainian National Bank (NBU) strengthened the official hryvnia exchange rate against the dollar by 2 kopecks, setting it at the level of 25.74 UAH per 1 USD, and as of July 17 - at the level of 25.86. Thus, in comparison with the previous working day, the dollar rose in price by 12 kopecks. These are minor fluctuations, so financial analysts do not expect sharp jumps before the elections to the Rada, and the dollar will be kept in the corridor of 25.7-26 USD.

Related: Ukrainian court allows defining salary in foreign currency

Well, what if the US currency would fall? After all, President Donald Trump is very serious about devaluing the dollar, while constantly criticizing the US Federal Reserve for high-interest rates, which is holding back the development of the American economy, since the higher is the rate of Federal Reserve System, the more expensive are the business loans.

Not even to mention the NBU discount rate in this context (by the way, in June, bank loans to the Ukrainian economy declined by 0.6%). According to the forecast of the Ministry of Economic Development and Trade, until the end of 2019, the average dollar rate will be at the level of 29.08 UAH, and the international rating agency Fitch Ratings predicts the average annual hryvnia rate would be 28.86 UAH in 2019, and 30.6 UAH in 2020.

Related: Ukraine's Parliament to introduce taxes on some operations with crypto-currency

Yes, there are leaders of the leading countries of the world who speak not only in business but also know how to implement their programs of industrial growth and the creation of new jobs. For example, in China, the ratio of the national currency to the country's GDP is several times higher than ours. And why doesn’t Ukraine do this? Yes, because a significant part of the national currency is replaced by dollars and euros.

It seems that the National Bank began to realize this idea and promoted with certain reservations and features (in June, the monetary base increased by 3.8%, to 17 billion USD).

Related: Ukraine’s National Bank changes requirements for deals registration at interbank currency market

It is also important for us to preserve and develop positive trends in the Ukrainian customs and in reducing the level of the shadow economy (by the way, in the past, in 2018, its level decreased by 2 points, by 30%, and was the lowest since 2009).

July 16, 2019, the Ministry of Justice registered a new Customs Service, headed by Maksym Nefiodov, as reported by Oksana Markarova, the Minister of Finance of Ukraine.

In 2018, the volume of adulterated or illegally imported products, according to experts, was:

- coffee - 40% (about 25 million USD);

- alcoholic beverages - 60% (up to 400 million USD);

- agrochemical products - 25% (200 million USD),

- household appliances and electronics in certain categories from 50% to 70% (300-400 million USD).

 July 16, this year, 2019, we learned from the press service of the state regulator that the National Commission on Securities and Stock Market and the Ministry of Economic Development and Trade plan to introduce a model of organized trade in commodity assets that will meet the best international standards.

Related: Law "On Currency": Pros and cons of currency liberalization

According to the press release of the National Securities and Stock Market Commission, it is planned to make changes to the current legislation on the transfer to the National Securities and Stock Market Commission of the functions of state regulation and supervision of the activities of commodity exchanges. I have no doubt that all this will go painfully and difficult, but there will not be powerful failures, and henceforth currency risks on exchange transactions will be hedged.

This already gives us hope for the development of a “civilized” exchange market in Ukraine and the centralization of liquidity, which would make the national currency stable.

Of course, a strong currency flows out of a strong economy, and vice versa - a strong economy strengthens the national currency. These processes are interdependent.

Without sustained economic growth, Ukraine will not be able to maintain political stability for a long time, which means that a new wave of negativity due to unresolved domestic problems and the devaluation of the American currency can quickly reach the hryvnia.

Read the original text at 112.ua

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