Hryvnia collapse: Ukrainian currency is being drowned at an accelerated pace by Privatbank
The significant drop in the hryvnia exchange rate against the US dollar, recorded in recent days, is the result of turning on the printing press to save PrivatBank.
Viktor Suslov, ex-Minister of Economy, told PolitNavigator about this.
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“The fact that the hryvnia exchange rate should fall in the long term is quite obvious - because Ukrainian exports are falling, because there is a large negative balance of the current account of the balance of payments, because Ukraine must service large volumes of external debts, for the payments of which foreign currency is needed. These are objective factors.
As for the acceleration of the depreciation of the exchange rate recently, the main factor here is the insolvency of PrivatBank and the fact that the NBU and the government are forced, after nationalization, to carry out very large money issues to restore solvency, which by now already amount to tens of billions of hryvnia.
There were several announcements about the allocation of large loans to the National Bank for refinancing and other measures to increase solvency. Naturally, there was a large release of a large hryvnia mass through PrivatBank, where the outflow of deposits continues. Accordingly, hryvnia demand for currency arose.
This is confirmed by data published at the end of last year on balances on correspondent accounts of commercial banks. From these data it followed that there were days when balances exceeded UAH 60 billion, that is, these are absolute records in the history of Ukraine. And the pressure of this entire hryvnia mass caused an accelerated depreciation of the hryvnia.
How long this will continue depends on how much the NBU will throw out emission, unsecured money. After all, the NBU announced that the deficit of PrivatBank’s funds is UAH 148 billion. If emission continues to be active, then, of course, the rate of decline of the hryvnia may remain high. It is already clear that the average annual rate, which was included in the NBU’s budget calculations, 27,2 UAH per dollar, will not be maintained.
In cash currency it is already about 28 UAH, and the year is only just beginning. It is impossible to accurately predict the dynamics of the exchange rate; as I already said, everything will depend on the specific actions of the government and the NBU. In addition, it can be assumed that the new management of PrivatBank will be able to return some loans that were considered doubtful for repayment or even irrevocable - then the government and the NBU will have to issue less money into circulation,” said Suslov.
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