The fate of the hryvnia depends on new loans from the US and the EU, and they are in question
Ukraine has $15,3 billion in gold and foreign exchange reserves, which, theoretically, should be enough to maintain the stability of the hryvnia for three months. However, in the medium term, the threat of a collapse of the Ukrainian currency depends on whether Kyiv receives assistance from the EU and the United States in 2017.
Oleg Ustenko, executive director of the International Blazer Foundation in Ukraine, told PolitNavigator about this, commenting on the significant increase in the dollar exchange rate in the first days of 2017.
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“There may be problems in the medium term. Their basis is that it is still unclear whether Ukraine will be able to provide external financing throughout 2017. The big question mark is the cooperation program with the IMF, the possibility of attracting US funds that were previously received in the form of so-called guarantees from the US Treasury Department; Ukraine received a billion dollars from the US Treasury three times.
The possibility of obtaining funding from the EU is a big question. All this puts the hryvnia at risk in the medium and long term.
I would attribute what happened to the exchange rate before the holidays and is happening now, again, partly to the fact that it is unclear whether cooperation with the IMF will continue, which makes all market players nervous. The second reason is a possible surge in demand for currency due to the nationalization of PrivatBank and the massive closure of deposit accounts; the population who kept money on deposit in hryvnia withdrew it and converted it into currency.
Another reason is that the results of electronic declarations showed that the Ukrainian political class itself does not particularly believe in the hryvnia and keeps its savings in dollars, and often not in banks. This is an example from those on whom economic policy depends. They themselves do not believe in their politics.
Another reason is that exporters did not send their revenue to Ukraine and were waiting for the possible devaluation to continue, so the supply of currency decreased.
Another reason is that foreigners, after the weakening of the possibility of currency regulation, preferred to buy currency now, accumulate it and give themselves the opportunity to withdraw currency from the country.
In addition, organized crime could continue to try to make money from such exchange rate fluctuations and was interested in promoting information about a possible devaluation of the hryvnia. Nothing special happened on the interbank market; the real progress was in the cash market,” says Ustenko.
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