January 22, 2017
Andriy Palka, IIP, International Investment Partners

Andriy Palka named reasons for the depreciation of the hryvnia in January 2017

There are several reasons that triggered the surge of the dollar in Ukraine after the Christmas holidays, and they can be clearly divided into external – global, which have nothing to do with the policy of the state leadership, and internal – caused by incorrect or belated actions of the Government, the NBU, the Verkhovna Rada and other government agencies.

About those in an exclusive interview with “Chetverta Vlada” (UA) said managing Director of International Investment Partners (IIP)  Andriy Palka.

Among the main external factors that put pressure on hryvnia, Palka names world prices for the main articles of Ukrainian exports (iron and steel, iron-ore raw materials, agricultural products, etc.) that remain at a low level.

“As a result, inflow of foreign currency into the country from the business is low,” – said the expert.

The second factor is the delay in receiving the next tranche from the IMF. Only yesterday, the head of the IMF Christine Lagarde said that Ukraine has fulfilled another condition, and the management of the Fund in the near future will decide the allocation of money. “You have to understand that they will go to Ukraine until mid-February,” – stressed Andriy Palka.

The third factor is the strengthening of the U.S. dollar against the foreign currencies, the fourth – the rapid depreciation of the Russian ruble.

“Despite all the assurances of our officials that we don’t depend on the situation in the Russian economy, the fall of the ruble has a negative impact on the hryvnia exchange rate in Ukraine”, – says Andriy Palka.

Among the internal factors that contributed to another round of devaluation of the hryvnia, Andriy Palka includes payments from the state budget, conducted late last year by the Cabinet of Ministers of Ukraine.

“At the end of the year the Treasury carried out payments in amount about 39 billion, part of them were on the correspondent accounts of banks. For example, January 4 on banks ‘ correspondent accounts was UAH 27 billion, and on 18 January – more than 45 billion UAH. And after the Christmas holidays, these amounts began to put pressure on the hryvnia,” – said Andriy Palka.

In addition, in the expert’s opinion, at the end of the year, the NBU, as it was earlier, strenuously “cut” application to purchase foreign currency from importers that, as usual, has created pent-up demand for currency, which splashed on the market in the first working week of January.

“It is important to note that payments from the Deposit Insurance Fund of individuals x to depositors of bankrupt banks were continued. Money usually went straight to the grey spot foreign exchange market, by which naturally pushed it up.

“Now the NBU has slightly tied the odd liquidity, and the balances on correspondent accounts went down. In parallel, the NBU once again came to the foreign exchange auction with the sale of currency and “cut” the lion’s share of the importers ‘ applications. The result was not long in coming – cashless exchange ratee was fixed at the level of 24.5-25.2 per UAH/USD., and the cash started to roll back up to 26.5-27 UAH/USD.”, – summed up Andriy Palka.