Break in Ukraine-IMF talks could make hryvnia much weaker – expert

An unsuccessful round of talks between the Ukrainian government and the International Monetary Fund (IMF) could make the forex rate of the Ukrainian hryvnia on the interbank market weaker, to UAH 28.2 per U.S. dollar next week.

Senior Research Analyst of the Alpari company Vadym Iossub said in a comment available to UNIAN.

Read alsoIMF mission ends without decision on Ukraine's SBA review

"Early this week, one should expect further growth of the rate of the dollar against the hryvnia, which on the interbank market can be traded near UAH 28.2 per U.S. dollar in a week," the expert said.

According to him, the cause behind the U-turn of the hryvnia from strengthening to weakening is the unsuccessful round of negotiations between Ukraine and the IMF.

"The reason for the U-turn of the hryvnia from strengthening to weakening is the round of negotiations with the IMF that ended in failure. Ukraine was unable to fulfill any of its obligations. We are talking about the remaining benefits in gas payments by households, and the lack of progress in the fight against corruption. New round negotiations may begin no earlier than March, and, accordingly, a new disbursement of the loan, with the most favorable outcome, may arrive no earlier than summer," he said.

Iossub recalled that over the past week, the dollar against the hryvnia had already significantly increased in all segments of the foreign exchange market by 0.3-1.1%.

"So, since last Monday, the official U.S. dollar rate set by the NBU has grown from UAH 27.77 to UAH 27.84 (+0.3%). At the same time, the spread between the average sale and the average purchase has widened from 0.8% to 0.9% due to the faster growth of the selling rate as compared to buying," he said.

Ukraine and IMF: Background

• On June 9, 2020, the IMF's Executive Board adopted an 18-month Stand-By Arrangement for Ukraine with funding equivalent to SDR 3.6 billion (about US$5 billion) aimed at helping Ukraine overcome the consequences of the COVID-19 pandemic.
• On June 12, Ukraine received the first tranche of the IMF loan under the SBA worth US$2.1 billion.
• In late November, the Finance Ministry reported on the successful completion of talks with the IMF on the benchmarks of the draft 2021 budget, which was one of the major prerequisites for starting the IMF to start the SBA review.
• On January 11, 2021, the IMF mission resumed its work in Kyiv.
• On February 13, it became known that an IMF mission, operating in conference mode, had ended without making a decision on the review of the Stand-By Arrangement for Ukraine.
• On February 13, Prime Minister Denys Shmyhal, commenting on the completion of the IMF mission in Ukraine, said Ukraine would continue constructive cooperation with the Fund.