Ukraine's National Bank expects slight rise in forex demand following Aug easing
The National Bank of Ukraine (NBU) expects the August package of foreign exchange liberalization measures to generate only moderate additional demand for foreign currency, which will be insignificant compared with the size of the foreign exchange market, the regulator said in response to a request from Interfax-Ukraine.
The National Bank explained that most of the transactions covered by the package do not involve the purchase of foreign currency. These primarily concern transactions with foreign currency accounts, including cash withdrawals and payments for goods, works and services, including housing rentals abroad.
An assessment of the impact of each individual measure shows that the liberalization will not have a decisive effect on the foreign exchange market and will not create risks to its stability.
Regarding the change effective September 1 in the procedure banks use to calculate their foreign exchange position, the NBU expects minimal additional demand for foreign currency.
"This is because the inclusion by banks of that portion of provisions formed against active operations that is currently not included in the calculation will take place very gradually, in accordance with the schedule approved by the National Bank," the regulator said.
As reported, on August 11 the National Bank introduced a new package of foreign exchange liberalization measures for individuals and legal entities and the financial sector. In particular, the regulator raised the monthly limit on individuals’ purchases of foreign currency in non-cash form from UAH 50,000 to UAH 200,000, increased limits on cash foreign currency withdrawals and payments abroad, and expanded a number of opportunities for businesses.
Starting September 1, banks will also be able to gradually include in their calculation of the foreign exchange position a portion of provisions formed against active operations that is currently not included in the calculation.