The National Bank of Ukraine (NBU) has canceled the licenses of FC Constanta M, DSD Finance, 24 Online and Financial Guarantee, which cover 15% of the currency exchange market, for violating the requirements of currency legislation, the press service of the regulator said on Friday.
According to the report, the central bank also fined Finovis and 24 Online companies UAH 151,000 each for violating money laundering laws.
It is indicated that as of August 4, the NBU conducted 40 inspections of structural units of 15 non-banking financial institutions.
These decisions were made at a meeting of the Committee on Supervision and Regulation of the Markets of Non-Banking Financial Institutions on August 5.
The National Bank of Ukraine (NBU) expects a reduction in international reserves in the second half of the year by 8.6% – from $22.8 billion to $20.8 billion and maintaining them at this level in 2023, the regulator’s forecast says.
According to him, at the end of 2023, the reserves will amount to $21.2 billion, and in 2024 they will grow to $28.7 billion.
At the same time, the current account balance, according to the regulator’s forecasts, will be positive and amount to $6.4 billion by the end of 2022, while at the end of last year it was negative and amounted to $3.2 billion.
The NBU expects that by the end of 2023 and 2024 this figure will be negative and amount to $3.9 billion and $8.8 billion, respectively.
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) will keep the current fixed exchange rate for the time being, Deputy Head of the Regulator Yuriy Heletiy said.
“For the time being, we keep everything as it is. A fixed exchange rate helps to contain the rate of price growth and meet the needs of the economy, which is slowly recovering. We will continue to monitor the situation on the market,” he said in an interview with Forbes.ua.
He added that the NBU is ready to consider refusing to fix the exchange rate if the uncertainty associated with hostilities decreases, in particular, the end of the hot phase of the war, as well as the stabilization of foreign exchange earnings and the improvement of the situation on the financial market.
In addition, although in the long term a fixed exchange rate has more disadvantages, in particular, it creates economic imbalances, reduces the competitiveness of Ukrainian producers, but it is necessary at present because it prevents panic, protects savings from hryvnia devaluation and reduces the cost of critical imports, Heletiy explained.
“At the same time, a floating exchange rate is not an end in itself, it is a means of achieving macro-financial stability,” the deputy head of the NBU specified.
As reported, on February 24, the National Bank suspended the work of the foreign exchange market of Ukraine, except for the sale of foreign currency, and fixed the exchange rate at the official level of that day – UAH 29.2549/$1, which led to the emergence of a “black” market, where in the first days the exchange rate reached 39-40 UAH/$1.
Later, the regulator allowed the sale of currency in branches under the threat of capture by the occupiers, by decision of their management, and from May 21, it canceled the upper limit of both the rate of selling cash currency by banks in Ukraine and the rate of converting the hryvnia into foreign currency on their cards outside the country. Previously, the ceiling for such an exchange rate was the official hryvnia exchange rate fixed on the first day of the war plus 10%, or UAH 32.18/$1. The ceiling for other currencies was calculated at the cross rate against the dollar.
The National Bank of Ukraine (NBU) expects a significant deterioration in trade indicators in 2022, but with a current account deficit near zero at the end of the year, Deputy Head of the Central Bank Serhiy Nikolaychuk said during a discussion organized by the Center for Economic Strategy (CES).
“So far, given our basic assumptions, we expect the current account deficit to be close to zero throughout this year. But in the memo, take into account that the outflow from the current financial account will be quite significant,” he said.
The deputy head of the National Bank noted that he had questions about the statistics recently published by the Ministry of Economy, in which imports in March fell significantly more than exports. “Based on the payments that we see, we do not see such a sharp reduction in imports and do not see that exports feel much better than imports,” Nikolaychuk stated.
According to him, an important component is the expansion of expenses of Ukrainian citizens abroad, which are not visible in the statistics for imports, but are visible in the payments of Ukrainian banks in foreign currency for Visa and Mastercard settlements. “In the balance of payments, this is an operation that leads to an expansion of the current account deficit,” the deputy head of the NBU explained.
He also clarified that now, when analyzing the current account, it is necessary to take into account that for a month and a half a significant part of imports came as humanitarian or military aid.
“We will see an increase in the trade deficit, but this will be offset by transfers to the secondary income account. That is, free humanitarian aid leads to a neutral impact on the current account,” the deputy head of the National Bank said.
It is also important to keep track of income from IT services, the dynamics of transfers, as there are different scenarios and different opportunities and risks, Nikolaychuk added.
In his opinion, imports will remain suppressed for a sufficiently long period, so the situation with the payment account will not be so bad. “But at the next stage, when we talk about the restoration of the Ukrainian economy after the war, we can count on a greater expansion and current account deficit. But let’s hope for financing from different sources,” the deputy head of the National Bank emphasized.
As reported, the World Bank, in its strongly deteriorated forecast for Ukraine, released this week, expects a current account deficit of 6.8% of GDP this year and its expansion to 16.8% of GDP in 2023.
On February 24, 2022, the National Bank of Ukraine (NBU) transferred part of the profit before distribution in the amount of UAH 19 billion to the state budget of Ukraine to financially support the functioning of the state under martial law, according to the website of the central bank.
“The National Bank promptly transferred part of the profit before distribution at the end of 2021 to the state budget of Ukraine. This amount is UAH 19 billion. This is a step that our state, its Armed Forces and every Ukrainian needs,” Governor of the NBU Kyrylo Shevchenko said.
The decision to transfer part of the profits was made by the Board of the National Bank of Ukraine on February 24, 2022.
As reported, the National Bank opened a special multi-currency account to raise funds for the needs of the Ukrainian army in connection with the introduction of martial law in Ukraine, the armed aggression of the Russian Federation and the danger to the state independence of Ukraine, its territorial integrity.