Archive 2016

  • Monthly Economic Monitor Ukraine No.6 (188)


    Highlight: Capital and currency controls

    In 2012 and 2013 the National bank of Ukraine (NBU) had difficulty maintaining peg of hryvnia to US dollar at UAH 8 per USD and introduced a number of measures to keep peg going including capital controls. These measures were imposed on temporary basis in addition to “permanent” capital controls that restricted capital outflows by Ukrainian residents. However, economic and financial crisis in Ukraine that started in 2014 had direct impact on exchange rate stability. As a result, the peg had to be abandoned in 2014. Between April 2014 and April 2016 hryvnia lost 35% of its value as compared to currencies of its trading partners. In response NBU took a number of actions to reduce volatility of the exchange rate. The NBU continued with interventions on the interbank market and expanded administrative measures to reduce capital outflows and increase supply of the foreign currency on the market.

    On June 7, the NBU made the most significant changes to capital controls so far. It reduced portion of foreign currency inflows mandated for sale to 65% from 75%, and allowed partial repatriation of dividends. The NBU increased limits for cash foreign currency purchases and cash foreign currency withdrawals from bank deposits. On May 25, the NBU also allowed purchase of foreign currency next day after hryvnia funds for purchase were deposited with the bank. This was likely part of changes in the capital controls agreed with the IMF as part of the second review of the EFF Program. These changes seem to be timed well. 

    Politics:The Parliament finally launched a reform of the judiciary.

    Real sector: According to the flash Ukrstat estimate real GDP increased by only 0.1% yoy in the first quarter of 2016.

    Energy sector:Gas consumption declined by 12% in the 2015-2016 heating season.

    Agriculture:Gross agricultural production in April decreased by 1.7% yoy.

    External sector: Current account in April was in surplus at USD 0.3 bn.

    Fiscal policy: Consolidated fiscal revenues in April declined by 4.2% yoy due to sharp decrease in non-tax revenues.

    Privatisation:The privatization of the Odesa Port Plant is to be announced in June and conducted in July.

    Social policy: The coverage of households by housing and utility subsidies increased sharply.

    Labour market:Average wage increased by 7.6% yoy in real terms due to the slowdown of inflation.

    Monetary policy: 12-month consumer inflation slowed to 7.5% yoy in May.

    Exchange rate: On June 8, the NBU allowed partial repatriation of dividends accrued by foreign investors and reduced mandatory sale requirement on foreign currency inflows.

    State debt:The Governments of Ukraine and the USA signed an agreement on the loan warranties for Ukraine at USD 1 bn.


    Issue:  No.6 (188) June 2016
    Attached file  (365.9 kb)
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