Photo from UNIAN
The IMF bailout conditions will likely fail to offer much relief for Ukraine’s beleaguered currency, which has depreciated about 61% since the beginning of last year, according to the conclusion of firms from Citigroup Inc. to Commerzbank AG.
The conclusion predicts the hryvnia will likely tumble as the east European nation eases capital controls under the terms of the IMF accord. Ukraine officials say that’s next on their agenda after they secure an agreement on a $19 billion international debt restructuring, according to Bloomberg.
The National Bank of Ukraine implemented the controls after the hryvnia dropped to a record UAH 34.247 per dollar in February as Russian-backed separatists seized much of the country’s industrial heartland. The currency has since stabilized, which strategists said may only exacerbate the drop once the restrictions are lifted, the report says.
The IMF predicts the hryvnia will end the year at UAH 23.5 to the dollar. Its bailout, plus savings from the debt restructuring and loans from the European Union and other nations, will be worth about $40 billion to Ukraine.
That’s money the country needs to rebuild its ravaged economy and infrastructure. The economy has shrunk 28% since December 2013 to $132 billion, while consumer prices surged 55% in July from a year earlier, the biggest increase in the world after Venezuela’s 68.5%.
It isn’t certain Ukraine will meet the conditions for the IMF aid. Talks in California on the debt restructuring failed to yield an agreement last week.
And while the National Bank Governor Valeriya Gontareva has said she’ll gradually lift the main currency restrictions by April, Commerzbank argues it won’t be easy for the authorities to let the hryvnia go.