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As soon as Ukraine gets money from the IMF, macroeconomic stability will be maintained, expert said.
Analyst at Univer Investment Group Mykhailo Fedorov says receiving a loan tranche from the International Monetary Fund (IMF) will allow the hryvnia, Ukraine's national currency, to strengthen significantly, namely to UAH 21 to the U.S. dollar by the end of the year under the best-case scenario.
"As soon as Ukraine receives money from the IMF, the country's macroeconomic stability will be maintained. Foreign capital will be buying Ukraine's government domestic loan bonds, due to which their yield will decrease, while the cost of servicing public debt will also reduce. In addition, Ukraine will receive money from the European Union and the World Bank. The country will be able to cover its budget deficit. So, everything will be fine with the country's public finances, at least in the foreseeable future," the expert said.
According to Fedorov, the hryvnia will soon be able to strengthen against the U.S. dollar to UAH 25 per dollar. Further, the dynamics of the official forex rate of the hryvnia may repeat those observed in 2019, when it strengthened from UAH 28 to the U.S. dollar in January 2019 and to UAH 23.2 in December 2019.
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"The rate at UAH 25 per dollar is a goal that can be achieved in a couple of months. After that, the hryvnia is likely to continue strengthening. I believe that rate may reach UAH 24 per dollar by the end of the year under a low-case scenario, UAH 23 under the base-case scenario, and UAH 21 under the best-case scenario," he said.
As UNIAN reported, an International Monetary Fund (IMF) staff team led by Ivanna Vladkova Hollar concluded remote discussions with the Ukrainian authorities on May 21 and reached a staff-level agreement on economic policies for a new 18-month Stand-By Arrangement (SBA) worth about US$5 billion to overcome the negative consequences of the COVID-19 pandemic.
The National Bank of Ukraine (NBU) says the country may receive the first tranche of the first IMF tranche worth US$2 billion in the second quarter of 2020.