Expected international support will help maintain the hryvnia exchange rate - NBU

The volumes of external support should be sufficient for Ukraine to continue ensuring a stable situation in the foreign exchange market and control inflationary and exchange rate expectations.

This is reported by UNN referring to the National Bank.

The National Bank states that the expected volumes of external support will be enough for non-issuance financing of the budget deficit and maintaining a stable situation in the foreign exchange market. It is noted that international support for Ukraine remains.

G7 countries have transferred the first tranches of aid to Ukraine under the ERA Loans program, a loan secured by revenues from immobilized Russian assets.

At the end of February, Ukraine also reached an agreement at the staff level regarding the seventh review of the extended funding program with the IMF.

The risks for the sufficiency of international financing remain balanced. The confirmed volumes of external support for this year should be sufficient for both non-issuance financing of the budget deficit and maintaining an adequate level of international reserves. This will allow the NBU to continue ensuring a stable situation in the foreign exchange market and control inflationary and exchange rate expectations

In addition, it is noted that the key risk for inflation dynamics and economic development remains the course of the full-scale war.

The war continues. Russian aggression continues to pose risks of further decline in economic potential, particularly due to losses of people, territories, and production. The speed of the economy's return to normal functioning conditions will depend on the nature and duration of hostilities

At the same time, geopolitical uncertainty has increased. This exacerbates the risks caused by Russian aggression, including:

• the emergence of additional budgetary needs primarily for maintaining defense capabilities;
• further damage to infrastructure, primarily energy, which will limit economic activity and put pressure on prices from the cost of production;
• deepening negative migration trends and further widening the labor force deficit in the domestic labor market.

Moreover, the risks of less favorable external economic trends than currently expected have intensified, particularly due to further geopolitical polarization of countries and corresponding fragmentation of global trade.

However, positive scenarios may also materialize. They are primarily related to increased financial support from partners (including through the use of the principal amount of immobilized Russian assets) and the efforts of the international community to ensure a just and lasting peace for Ukraine. Further acceleration of Euro-integration processes and infrastructure reconstruction, including energy, is possible

NBU has again raised the discount rate - to 15.5%06.03.25, 14:03 • 39571 view

Supplement

In Ukraine, inflation will rise in the coming months due to the continued impact of poorer last year's harvests and increased production costs for enterprises.