The use of exchange rate policy to address structural imbalances when international reserves are sufficient is a wrong decision, according to First Deputy Governor of the National Bank of Ukraine Sergiy Nikolaychuk.
In an interview with Interfax-Ukraine, he explained that the main factor behind the downgrade of GDP growth forecasts and revision of inflation in 2024 was increased security risks and the impact of weather conditions on crop yields.
“We analyze in detail the dynamics of missile strikes, drone attacks, and the duration of air raids. Unfortunately, this year the situation is much worse than last year. This has a direct impact on business activity and the economy’s potential,” Nikolaychuk said.
According to him, the foreign trade deficit is an “objective reality” caused by the war, increased imports for defense and energy needs, and reduced export opportunities.
“It would be wrong to solve these structural problems through exchange rate policy when we have a sufficient level of international reserves. We see other ways – more active state policy through duties, taxes or non-customs barriers to non-critical imports,” he emphasized.
The official emphasized that the National Bank continues gradual currency liberalization and has provided businesses with tools to hedge currency risks.
