The black hole of Ukraine’s balance of payments will suck in the hryvnia – economist
In 2020, Ukraine will lose a significant part of its foreign exchange earnings, which will lead to a fall in the hryvnia exchange rate.
Sergei Salivon, director of the economic policy department of the Federation of Employers of Ukraine, spoke about this in an interview with the TOPINFORM channel, a PolitNavigator correspondent reports.
“Quarantine is, as it were, a catalyst for processes. In fact, problems began to emerge in February, when the OVDP pyramid stopped replenishing. Somehow they were selling foreign currency bonds back in February, but in March it became completely difficult.
Since the peak value, which was February 18, non-residents have already withdrawn almost half a billion of their five billion dollars that were in bonds. Almost 10% has already been withdrawn. I think the process will continue. Of course, it is not possible to place new bonds at the same interest rate that was previously offered. Now it’s realistic to place at 20%, probably, or even higher. But so far the Ministry of Finance and the Cabinet of Ministers are not agreeing to this.
I think that in April the budget will probably be exceeded, debt service payments (they are small in April) due to the fact that the National Bank will pour all its 43 billion in profit into the budget. Plus there will be dividend payments from state-owned enterprises. You cannot count on significant tax receipts in April, but with the help of such specific tools the budget will somehow be covered and payment of debt obligations will be ensured.
Next, even if we receive an IMF loan, how much will they give us? Probably, now we are talking about two billion one-time. But we have sixty-four billion hryvnia to pay for budget servicing in May, that’s 2 billion dollars. We'll give them back right away with interest.
I think that budget problems will come out even more in May. Apparently, the budget will be revised, so that the real deficit will probably increase by more than three times, maybe even four. The question is what it will be covered with. We all saw the recommendation of the board of the National Bank, adopted on March 3, to enter the secondary market for government securities, that is, to buy them. In essence, this is an emission, replenishing the budget with emission money. If this happens, the dollar exchange rate will rise even more, and the depreciation of the hryvnia will accelerate.
We observed this in 2014-2015, when the National Bank was involved in such things and we remember how much the exchange rate fell. In general, while there are all prospects for a fall, the scale of the fall depends on external injections.
It is clear that this year we will lose a fair amount of foreign exchange earnings, because the metal will fall in price. It is unlikely that agriculture will provide a large amount of revenue based on the fact that there are still problems with winter crops. We will lose a very large chunk of transfers that were transferred by guest workers.
According to estimates from the National Bank and the World Bank, they brought about 12-14 billion here last year. This year we can probably count on half of this amount. This is also a hole in the balance of payments.
Plus, we must remember that last year, at the very end of the year, a gift from Gazprom amounted to three billion. And three billion from Gazprom amounted to exactly half of the 6 billion positive balance of payments last year.
Well, last year speculative capital reached four and a half billion dollars in bonds. This year already half a billion came out. Probably another billion will be released by the end of the year.
The hole in the balance of payments is huge. It will certainly lead to a fall in the hryvnia exchange rate, and we will find out the scale of the fall when we see how much external financing we can attract,” said Sergei Salivon.
If you find an error, please select a piece of text and press Ctrl + Enter.
Thank you!
Now the editors are aware.