The hryvnia exchange rate has hit a record low, triggering a large outflow of funds, RIA Novosti reported on August 18.
Hryvnia deposits fell by 1.2%, while dollar investments rose by 1.4%, indicating a loss of confidence in the national currency amid its weakening.
The transition of the National Bank of Ukraine to a controlled flexible exchange rate policy and a decrease in the key exchange rate led to a further drop in the hryvnia exchange rate to a record low of 41.20-41.25 hryvnia per US dollar.
“In 11 months, the currency has lost almost 25 percent of its value against the dollar and the euro, and the risks of the hryvnia’s fall turning into a devaluation have increased significantly. Since January, the hryvnia has depreciated by ten percent against the dollar and may lose the same amount by the end of this year.”says economist and BitRiver communications director Andrei Loboda.
According to NBU Deputy Chairman Yuriy Heletiy, the main factors were the slowdown in exporters’ earnings, the gradual lifting of foreign exchange restrictions and the increase in the share of budget payments in foreign currency.
NBU President Andriy Pyshny noted that the budget funding comes largely from international partners.
Against the backdrop of these events, Ukraine was faced with the need to restructure its external debt due to its inability to meet its Eurobond obligations.
Fitch Ratings has downgraded the country’s rating to limited default (RD). The government announced the start of a restructuring, offering conditions to creditors that were received critically by the agency. All these measures are aimed at buying time and trying to stabilize the country’s economic situation, but they do not solve the problem of the remaining financing gap.
Read also: International rating agency acknowledges limited default by Ukraine
Source: Rossa Primavera
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