The exchange rate is under full control — an economist forecast whether sharp currency fluctuations should be expected
Kyiv • UNN
The expert forecasts a controlled devaluation of the hryvnia by 2–3 hryvnias per year. By the end of 2029, the exchange rate could reach around UAH 50 to the dollar.
The exchange rate in Ukraine is determined not only by supply and demand, but also by the controlled flexibility of the National Bank of Ukraine. In a comment to UNN, Oleh Hetman, coordinator of the expert groups at the Economic Expert Platform and an associate expert at CASE Ukraine, said that the regulator is gradually weakening the national currency in order to keep inflation within the target range; however, there will be no sharp fall in the hryvnia.
Details
At the beginning of November, the dollar-to-hryvnia exchange rate stood at 45.5 hryvnias per dollar, while the currency rose the most on November 4, when the NBU set the rate at 45.66 hryvnias per dollar.
After that, the exchange rate began to stabilize somewhat, and today, November 10, the dollar-to-hryvnia rate stood at 45.5 hryvnias.
As Oleh Hetman told UNN in a comment, over the past few years nothing has affected the dollar exchange rate except the NBU's view and macroeconomic assessment of the situation.
Under a controlled exchange-rate regime—not as flexible as before, when only supply and demand determined the dollar exchange rate—and now under a regime of managed flexibility, the NBU essentially directs the dollar exchange rate and smooths fluctuations. The NBU's gold and foreign-exchange reserves are close to $50 billion, so it can afford to do almost anything with the exchange rate. And it is guided solely by its own understanding of the macroeconomic situation. There is also a certain request from the Cabinet of Ministers, but the NBU may ignore it if it contradicts this understanding of the macroeconomic situation. Accordingly, the NBU understands that the huge gap between imports and exports is continuing to grow. Our exports are about $50 billion lower than imports annually
According to him, this huge gap must somehow be gradually reduced, and this can be done only through a very slow—not sharp or hysterical—devaluation of the hryvnia.
Therefore, the NBU acts within this framework and very slowly devalues the hryvnia by several hryvnias each year. Last year, it was by one and a half hryvnias, I believe; this year, it will be by 2–3 hryvnias, but no more. Therefore, there will be no dramatic jumps or any rapid inflation or devaluation—nothing of the sort—because the NBU fully controls this process
He notes that, as in all previous years, the exchange rate will decline by several hryvnias per year.
Next year, it may change by another 1–2 hryvnias, so by the end of 2029, perhaps, we could hypothetically reach around 50 hryvnias per dollar. It is impossible to expect anything else because the NBU fully controls this process, and the NBU's main goal is to contain inflation. It is trying to keep it within 5%; so far, it has not succeeded, but it will continue trying. In order to target inflation and move toward the target figure of 5%, it needs to keep the hryvnia exchange rate within reasonable limits, devaluing it by only 1–2 hryvnias