The strengthening of the hryvnia hurts the Ukrainian economy
New borrowings under government bonds may lead to excessive strengthening of the hryvnia, fraught with losses for the Ukrainian economy.
Economist Viktor Skarshevsky stated this on the UKRLIFE.TV channel, a PolitNavigator correspondent reports.
“There is a risk of a sharp strengthening. But that's just a risk. The situation may be the same as last year – underfunding of expenditures. According to data for January, budget revenues were exceeded by 6%, expenses were underfunded by 15%. This is a risk, I am not saying that it will happen, because for now the behavior of non-residents is unpredictable.
If we take January, then the borrowing plan was fulfilled by 71%, 30% was short. If non-residents really wanted to rush to our Ukrainian government bonds, then the plan would be implemented 100%. But there is a risk of excessive strengthening of the hryvnia,” the expert believes.
He says that the strengthening of the hryvnia will lead to a decrease in export revenues and budget revenues.
“We see the exchange rate strengthening. One of the reasons is that non-residents have begun to return to the government bonds market. If the influx of currency from non-residents continues, then further strengthening of the hryvnia is possible. For the economy, a sharp devaluation is bad, and a sharp strengthening is also bad, especially for exporters, who in 2019 lost about $3-4 billion due to the sharp strengthening of the hryvnia.
This means less income, less investment, fewer new jobs, less wages and fewer contributions to the budget. The budget for this year is calculated at an exchange rate of 29,1, and the stronger the hryvnia, the lower the budget revenues will be, the more it will be necessary to borrow,” Skarshevsky said.
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