Mitigation of NBU's monetary policy before parliamentary election could increase pressure on hryvnia, says expert

Kyiv, July 4 (Interfax-Ukraine) – The possible mitigation of the monetary policy of the National Bank of Ukraine (NBU) before the parliamentary election and the possible stirring up of the process of the conversion of the hryvnia deposits of the public into foreign currency could result in strengthening pressure on the hryvnia, a managing partner of Capital Times investment company Erik Naiman has said.

"The main risk for the hryvnia is the printing press of the NBU. We understand that before the election they will start fulfilling social promises and start printing money," he said at a press conference at Interfax-Ukraine on Wednesday.

He said that the printing of UAH 5 billion would not be critical for Ukraine, while the printing of over UAH 10 billion could by a negative factor, as free hryvnias will inevitably flow to the currency market.

Naiman said that in the near term the NBU could commence realizing a statement on a gradual switch to a more flexible exchange rate in practice.

"I think that soon legal acts on a switch from a fixed to a certain floating exchange rate in a certain corridor will appear, and it's likely that it will be wider than 2-2.5% as declared today," the expert said.

He said the hryvnia exchange rate could decrease to UAH 8.25/$1 by the end of 2012, and to UAH 8.50-8.60/$1 by late 2013. The average exchange rate in 2012 could be UAH 8.04/$1 and in 2013 – UAH 8.31/$1.

Inflation in Ukraine could be 5-6% in 2012 and 2013, the expert said.