Ukraine's economy minister explains forex rate changes / Photo from UNIAN
The exchange rate set at UAH 23.5 per dollar hit hard both farmers and steelmakers last year.
Ukrainian Minister for Development of Economy, Trade and Agriculture Ihor Petrashko says the strengthening of the hryvnia, Ukraine's national currency, should be capped at UAH 25-26 to the U.S. dollar.
Speaking in an interview for the RBC Ukraine news agency published on July 22, the minister also commented on the swiftly weakening hryvnia, saying it should stop at UAH 27-28 to the U.S. dollar.
Stronger hryvnia
"Firstly, I think the hryvnia should be stronger. But with the rate being UAH 27-28 now, [the revaluation] should not go beyond UAH 25-26. Exporters do not expect the hryvnia to weaken. We need fluctuation-free stability to avoid a repetition of last year's situation. This makes me worry most. The exchange rate set at UAH 23.5 per dollar hit hard both farmers and steelmakers. They bought mineral fertilizers, chemicals for plants, and fuel when the rate was UAH 28 per dollar and sold [produce] when it was UAH 23 per dollar. Who has won from this?" he wondered.
Read alsoHryvnia weakens to UAH 27.66 to U.S. dollar on July 22
Dangerous fluctuations
According to Petrashko, fluctuations of the forex rate have transferred the margin from the productive sector to the unproductive one.
"The yield on government domestic loan bonds at that time hit highs, reaching 30% in the absence of any risks. How could one allow this? They extracted money from industrialists and farmers via the exchange rate, without any reason, but failed to replenish the [international] reserves when they could do this. Why not to buy foreign currency? The reserves would have been higher and the rate would have been UAH 27 per dollar. We would not have had a decrease in GDP. I think the falling GDP is not the fault of [Oleksiy] Honcharuk's government but [the result of] the National Bank's unreasonable forex rate policy and the virtual extraction of money from the real sector of the economy in the fourth quarter for redistribution to unproductive sectors," Petrashko said.
Ukraine should not have let the hryvnia strengthen, as the country is an emerging market, he added.
Recent forex developments
The National Bank on July 21 set the official forex rate for July 22 at UAH 27.66 to the U.S. dollar, which made the country's national currency weaken by six kopiykas.
The hryvnia has seen losses in value against the U.S. dollar for the third consecutive day.
Earlier, the regulator set the official forex rate for July 21 at UAH 27.60 to the U.S. dollar, which made the country's national currency weaken by 24 kopiykas.