The Cabinet and National Bank announced the hryvnia’s floating rate in a joint statement which failed to make headlines, meaning it was most likely for the IMF missionaries as this official 2000 Ukrainian national currency exchange rate policy had become a reality in Ukraine starting in March 1999.
The hryvnia’s formal withdrawal from the currency trade band and being allowed to float free was yet another opportunity the Cabinet used to demonstrate its attainments for the International Monetary Fund to see, even though the latest IMF mission in Ukraine most likely ended without result.
Premier Viktor Yushchenko declared that the floating hryvnia was evidence of the Ukrainian national currency’s stability, and that the government’s foreign exchange rate policy was kept within “clearly defined and controlled parameters.” He further said he was positive the floating rate was a “demonstration of this government’s strong policy” and that it would not cause any degree of instability on the currency market, reports Interfax Ukraine.
Presidential consultant Anatoly Halchynsky described the hryvnia’s floating rate as the “most optimal” with regard to the economy, one showing positive trends, and promised that the rate “can show an even greater degree of stability than within the limits of the currency trade band.”
As for other currency market operators, their response to the hryvnia’s floating rate can best described as restrained. They have grown accustomed to it and consider the National Bank’s move a pure formality. Another thing making the NBU statement such a formality is the fact that the floating rate policy does not entail any commitments by the government or NBU with regard to the hryvnia; in other words, there are no reference points for businessmen. “Far from all in the real sector are prepared to operate without any exchange rate guarantees,” says Volodymyr Bezrodny, Mriya Bank department head.
Oleksandr SUKHONIAKO, President of the Association of Ukrainian Banks, told The Day , “There is professional contact established between the Cabinet and National Bank; there is complete understanding between them; the floating exchange rate is a normal phenomenon under the circumstances. The Constitution reads that the hryvnia must be kept stable. The National Bank is responsible for it. While previous governments failed to understand the importance of this, today’s Premier will never do anything to undermine the hryvnia. The government’s currency policy comes down also to balancing the interests of exporters and importers, proceeding from the national policy in the foreign trade domain, aimed at reviving Ukraine’s foreign economic balance.”
Serhiy OKSANYCH, President of the Investment Business Association of Ukraine, is positive that the newly introduced floating rate is good for his country. In his words, the currency trade band was needed by the Ukrainian state when “manipulating internal bonds on the international market, Today, it is an unnecessary relic that gets in the way of quick and effective decisions.”
“The hryvnia rate will from now on be a clear indicator of the National Bank’s emission and monetary policy,” People’s Deputy Serhiy TERIOKHYN told The Day, adding that “it will also show Ukraine’s role in the world, whether this country is just a buyer or it can also act as a seller. If the former is true the rate will float; in the latter case it will remain stable. In a word, the hryvnia exchange rate will serve as a true indicator making it possible to determine the country’s economic status. Is this anything a Ukrainian citizen could do without? He will know whether he can trust the national currency. But there is also a minus. When devaluing the hryvnia, particularly for the exporter’s benefit, domestic market prices will rise. When bringing the hryvnia back up, which could then happen, these costs are known to remain high. In any case, this practice existed at the time of the currency trade band and now may be the time for it to change.”
