According to the Ministry of Economy, the average annual exchange rate of the hryvnia to the US dollar in 2023 is expected to be 37.5 UAH/$1 in the draft state budget for 2024, compared to 32.3 UAH/$1 last year.
For 2024, the draft state budget provides for an average annual exchange rate of 41.4 UAH/$1.
As reported, the average annual exchange rate for this year during the adoption of the state budget for 2023 last fall was expected to be 42.2 UAH/$1, and the exchange rate at the end of 2023 was 45.8 UAH/$1.
At the same time, the National Bank has kept the official hryvnia exchange rate fixed at 36.57 UAH/$1 since the end of July 2022. On the cash market, the exchange rate has stabilized at around 38 UAH/$1 this year, while last year it was falling to 39 UAH/$1 and even more.
Over the past week, following the announcement by Finance Minister Sergii Marchenko of the forecast for the average annual exchange rate for 2024, the hryvnia has fallen to 38.3 UAH/$1 on the cash market.
In a September survey, members of the European Business Association predicted an average annual exchange rate of 41 UAH/$1 for 2024, while a year ago they expected 43 UAH/$1 for 2023.
The transition from a fixed to a floating exchange rate with a temporary limitation of daily exchange rate fluctuations within a narrow range is proposed by UC Berkeley economics professor Yuriy Horodnichenko in an article on the analytical platform Vox Ukraine.
“Because of the nature of a fixed exchange rate, potential price distortions and imbalances accumulate over time, and the economy eventually reaches a tipping point where an exchange rate adjustment is needed again. Consequently, another exchange rate correction during a protracted war will almost certainly happen,” he explained the need to abandon this regime.
According to Gorodnichenko, among the imbalances already visible are an increase in the real exchange rate, a gap between the official and cash exchange rates, a lack of attention to the euro (since the EU is Ukraine’s main trading partner) and the political postponement of necessary exchange rate adjustments.
“Given the high sensitivity of inflation expectations to the exchange rate in Ukraine, a free floating exchange rate could entail excessive macroeconomic volatility. Indeed, the hryvnia fluctuated sharply during 2014-2015 after the first Russian invasion. We need an intermediate solution,” said the economist.
In his opinion, limiting daily fluctuations in the exchange rate (for example, 0.1% on any day) could be an acceptable intermediate solution. Among the advantages of this option Gorodnychenko mentioned operational freedom of the central bank, the absence of sharp macroeconomic adjustments and shocks, the NBU’s management of the euro-hryvnia exchange rate during Ukraine’s accession to the EU.
He added that such a regime does not mean a mandatory devaluation of the hryvnia. “The experience of the hryvnia during the COVID-19 crisis highlights how useful this is for Ukraine: after the hryvnia weakened during the first days of the crisis, it eventually strengthened as demand for Ukrainian products remained high. Due to such flexibility the Ukrainian economy felt relatively well in 2020-2021,” reminded the economist.
Gorodnychenko stressed that this policy alone cannot solve all problems, such as the broken mechanism of monetary transmission, and to achieve the desired results it will need to be supplemented by other measures, particularly restricting capital flows, the alignment of interest rates on deposit certificates of the NBU and government bonds.
The economist pointed out that there are other options for intermediate solutions, but they are, in his opinion, less preferable.
On Tuesday, the hryvnia exchange rate in the cash market strengthened by more than 1 UAH/$1, to a level of about 39 UAH/$1, at which it stayed on the first day after the National Bank refixed the official rate from UAH 29.25/$1 to 36, 57 UAH/$1.
According to market participants, at present in some non-bank exchangers in Kyiv it is already possible to buy a dollar a little cheaper than UAH 39/$1, while most banks still offer a selling rate of UAH 39/$1 or worse.
According to the “Minfin” resource, on Thursday morning Raiffeisen Bank declared a selling rate of UAH 38.8/$1, Universal Bank – UAH 38.9/$1, while PrivatBank – UAH 39.15/$1, while the best buying rates are now do not exceed UAH 38.4-38.5/$1.
On the cash “gray” market on Thursday morning, according to the Ministry of Finance, the dollar was quoted: buying – UAH 38.4 / $ 1, selling – UAH 39 / $ 1, having won back UAH 0.1-0.2 after falling by 1.1 -1.3 UAH the day before.
Oleg Gorokhovsky, co-founder of monobank, said that in the first day after the launch on Tuesday evening, about $9 million were sold in the application for buying non-cash currency for placement on a deposit for a period of three months and 11.273 thousand contracts were concluded with a total number of bank customers of about 6 million.
Cash exchange rates in banks of regions of Ukraine
| Region | USD1 | EUR1 | |||
| Buying | Selling | Buying | Selling | ||
| Min | 27.50 | 38.80 | 36.75 | 39.00 | |
| Kyiv | Max | 38.50 | 39.70 | 38.90 | 40.50 |
| Average | 37.91 | 39.19 | 38.13 | 39.63 | |
| Min | 37.00 | 39.00 | 37.50 | 39.50 | |
| Odessa | Max | 38.00 | 39.80 | 38.00 | 40.80 |
| Average | 37.50 | 39.43 | 37.83 | 40.07 | |
| Min | 37.50 | 38.80 | 37.70 | 39.48 | |
| Lviv | Max | 38.70 | 39.49 | 39.05 | 40.30 |
| Average | 38.34 | 39.14 | 38.62 | 39.70 | |
| Min | 36.57 | 37.57 | 37.27 | 38.30 | |
| Kharkiv | Max | 37.50 | 38.80 | 38.10 | 39.60 |
| Average | 37.04 | 38.19 | 37.69 | 38.95 |
From 09:00 on July 21, 2022, the National Bank of Ukraine adjusted the official exchange rate of the hryvnia against the US dollar by 25% – from UAH 29.2549/$1 to UAH 36.5686/$1, taking into account changes in the fundamental characteristics of the Ukrainian economy during the war and strengthening of the US dollar against other currencies, according to a message on the NBU website.
“Such a step will increase the competitiveness of Ukrainian producers, bring together the exchange rate conditions for different business groups and the population and maintain the stability of the economy in a war,” the National Bank said.
He stressed that the official exchange rate of the hryvnia against the US dollar continues to be fixed.
“With the high uncertainty caused by the war, a fixed official exchange rate against the US dollar is the main anchor for stabilizing expectations and a key means of achieving the NBU’s priority goals. They are to ensure price and financial stability, which is an important condition for economic recovery,” the regulator explains its position.
The National Bank of Ukraine (NBU) lifted a restriction on May 21 that allowed authorized institutions to sell cash foreign currency to customers with a deviation from the official no more than 10%, the press service of the regulator said on Friday.
Relevant changes were adopted by the NBU Board Resolution №102 of May 20, which was published on the Central Bank’s website and comes into force on May 21.
The document also removes similar restrictions on setting the exchange rate at which banks write off hryvnia funds from customers’ accounts if customers pay with hryvnia cards abroad.
“Removing restrictions on the exchange rates at which banks sell currency to the public will improve the working conditions of legal market participants. This will increase competition, increase liquidity in the legal segment and reduce illegal transactions. All this will make the foreign exchange market more stable and reduce exchange rate amplitude. fluctuations in its cash segment, “the press service of the Deputy Head of the NBU Yuri Geletiy was quoted as saying.
