Formerly, NBU Governor Serhiy Tihipko expressed his confidence that by the end of 2004 the euro-dollar exchange rate will begin to decline. Tihipko is convinced that even though the euro is strengthening against the dollar the bank’s policy will not change, and in 2004 the hryvnia will remain pegged to the dollar. As he put it, the question of using a basket of currencies is currently not on the agenda. Last Tuesday Tihipko stressed that the dollar is used in 70% of Ukraine’s foreign trade operations, and this obviously will not change in the near future. Since the beginning of 2004 the hryvnia appreciated by a mere 0.01% relative to the dollar. Over the same period the hryvnia depreciated by 1.72% against the euro.
Simultaneously, the NBU governor confirmed an increase in the share of euros in the NBU gold and currency reserves. “Currently, central banks in many countries are reducing their volume of dollars and increasing the volume of euros. I can say that we did this before everybody else and consider the current structure of our reserves the best possible,” he said. Yet he did not disclose the dollar-euro ratio in the structure of the NBU reserves, citing the secrecy of this information.
To quote Tihipko, since the beginning of 2004 NBU gross gold and currency reserves have increased by 3.5% to reach $7.177 billion. First NBU Deputy Governor Arsen Yatseniuk specified that by the end of 2004 they will reach $8.5 billion. According to his forecasts, “the gross reserves will reach $9.5 billion, but adjusted for payments on the foreign debt they will come to $8.5 billion. Yet during the year the reserves will even reach $10 billion, if you do not count the foreign debt payments.” It will be recalled that this year the Finance Ministry plans to allocate from the state budget some $2.4 billion for the payment of the state debt and interest, of which $1.5 will be payments on the foreign debt.
To compensate for these expenditures Ukraine might issue government bonds. Yatseniuk believes that this year conditions are favorable for floating government and corporate eurobonds. In his view, the major preconditions for this were created last year. He further explained that by preconditions he means the successful placement of government eurobonds and the foreign market situation with relatively low interest rates, as well as Ukraine’s good record of using the mechanism of securing foreign loans. “All these factors create wonderful conditions for the placement of any bonds on foreign markets,” Yatseniuk summed up.
As for domestic loans, Tihipko thinks it was a right decision to restrict purchases of internal government bonds by nonresidents and introduce the procedure of restricting the volume of purchases to be monitored by a committee consisting of three Finance Ministry representatives and three NBU representatives. “The National Bank, which follows and has some idea of the balance of payments structure, must take care of this,” he stressed. Formerly there had been no restrictions on the purchase of internal government bonds by nonresidents. Yet the NBU maintains a separate list of nonresidents in possession of internal government bonds.
