REUTERS
This is due to the critical dependence of the Ukrainian economy on external market conditions, while the country's international reserves remain inadequate.
The National Bank of Ukraine (NBU) considers it appropriate to maintain the effect of certain protection measures in the country's foreign exchange market.
"Despite the overall improvement in the forex market, lower exchange rate volatility and growing international reserves, the need to continue certain protective measures remains," reads the regulator's report on remedies presented by NBU Governor Yakiv Smolii during a meeting of the Verkhovna Rada Committee on Financial Policy and Banking.
This is due to the critical dependence of the Ukrainian economy on external market conditions, while the country's international reserves remain inadequate, the report said.
In addition, the Ukrainian economy is still vulnerable to excessive exchange rate fluctuations. Moreover, the possibility remains limited of hedging currency risks.
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The banking system is also vulnerable to changes in the exchange rate due to the high dollar share in the loan portfolio, which is especially important for state-run banks (except for PrivatBank) and banks with Russian capital.
According to the NBU, the legislation provides, among other things, such protective measures as mandatory sale of currency, deadlines for settlements under export-import contracts, and limits on carrying out certain forex transactions. However, no specific proposals are stipulated for the extension of certain protective measures.
"The National Bank remains committed to further liberalization of currency relations. The protective measures introduced are intended primarily to ensure the gradual and consistent process of currency liberalization, its conformity with the changes that occur in the real economy and financial markets, as well as Ukraine's obligations under the IMF's Stand-By Arrangement," the document says.
The NBU is planning further steps in currency liberalization in line with the roadmap. However, the transition to a full-fledged free capital flow regime requires the adoption of a "split" law (the unbundling of the functions of the National Commission for Regulation of Financial Services Markets between the National Bank and the National Commission on Securities and Stock Market) aimed at improving the quality of regulation of the non-banking financial market, and the law on countering BEPS (Base erosion and profit shifting).
UNIAN memo. The law of Ukraine on currency and forex operations, which lifted about 30 restrictions in the country's forex market, came into effect on February 7.