Ukraine central bank slightly relaxes currency controls

The National Bank of Ukraine (NBU) issued a June 3 directive ordering slightly relaxed currency regulations starting June 4. In particular, the NBU increased limits on daily cash withdrawals from banks to UAH 300,000 (from UAH 150,000), as well as relaxed restrictions on foreign currency purchases for legal entities that have own foreign currency in Ukrainian accounts (now having more than USD 25,000 on accounts will deny a legal entity the opportunity to purchase extra foreign currency compared to USD 10,000 previously). In addition, the NBU increased the threshold of currency trasnfers abroad - exempt from complicated verification proceduers - to USD 50,000 (from USD 25,000).

At the same time, major restrictions were kept in place, including a ban on early withdrawals of foreign currency savings deposits, a four-day waiting period for foreign currency purchases, and an obligation of exporters to sell 75% of their foreign currency proceeds.

Alexander Paraschiy: The NBU’s move is symbolic and intended to signal optimism about the national currency’s prospects. The Ukrainian currency has been strengthening since March due to improved external accounts and halted hryvnia printing. Against this backdrop, tension at the market has eased somewhat and the NBU wants to strengthen the tendency by relaxing controls. Still, the situation remains very shaky. The ForEx market is very thin with USD 264 mln in average daily turnover in May (compared to more than USD 1 bln in daily turnover at the start of 2014).

What’s more, we anticipate the positive devaluation effect on budget collections to fade over the upcoming months, possibly requiring resumed hryvnia printing for fiscal needs. Any escalation in the Donbas war can destabilize the ForEx market at the snap of a finger. All in all, the NBU’s relaxed controls are welcomed but not a turning point since risks remain that volatility will return to the market.

Источник: Конкорд Капитал