Long political confrontation could result in devaluation pressure, say experts
A long period of political confrontation could result in devaluation pressure on the Ukrainian hryvnia, according to bankers polled by Interfax-Ukraine.
"If the crisis and confrontation are long, the calculated indicators of the hryvnia exchange rate stipulated in the national budget for 2014 are very likely to be revised," First Deputy Board Chairman of Prominvestbank Viacheslav Yutkin said.
He said that the experience of other countries where the public gathered to hold rallies on squares this year shows that the economy and the national currency saw large losses.
Deputy Board Chairman of Finance and Credit Bank Viktor Holub said that the National Bank of Ukraine (NBU) is able to support the hryvnia exchange rate if required.
"If we assume that along with the mass nervousness of the public the hryvnia exchange rate shows instability, even remembering the set of measures taken by the NBU nine years ago, one can say for sure that the NBU has all the required instruments to retain the exchange rate," he said.
Yutkin said that the level of the possible exchange rate devaluation would directly depend on the package of measures proposed by the president and the government to stabilize the political situation.
"If the confrontation lasts for a long period of time, the devaluation in December could be close to 10%," the banker said.
He said that a duty on the sale and purchase of foreign currency for companies could be introduced to support the exchange rate stability. In addition, restrictions for a certain period of time on the early withdrawal of deposits at banks could be introduced: this measure was used by the regulator in the crisis period and proved effective, Yutkin said.
Ukrsotsbank analyst Tanteli Ratuvuheri said that by the end of 2013 the hryvnia exchange rate would not change much, while in the long term the country would not be able to avoid a devaluation.
"Of course, at present, there will be attempts to speculate with the situation and provoke high demand for foreign currency. Nevertheless, it's likely that the exchange rate will remain stable in the short-term outlook, taking into account the desire of authorities to stabilize the situation. In the long-term period it's likely that the country will fail to avoid the devaluation of the hryvnia," he said.
The expert said that the NBU could use administrative measures to maintain exchange rate stability, such as a temporary ban on the early withdrawal of deposits, an increase in the volume of the obligatory sale of foreign currency revenues of enterprises, and restrictions on the sale and purchase of foreign currency on the cash market.
As reported, Ukrainian Premier Mykola Azarov said that any destabilization of the political situation in the country could affect the economic indicators and the hryvnia exchange rate.
The exchange rate to sell cash U.S. dollars downtown Kyiv on December 2 slightly grew, to UAH 8.2450/$1 from UAH 8.2400/$1 on November 29.