Ukraine must align official and mkt hryvnia rates-council
New guidelines for a corridor will be worked out?
Ukraine`s central bank should endeavour to maintain a minimal difference between the hryvnia`s official and market rates, the head of the bank`s policy-making council said on Thursday, according to Reuters.Petro Poroshenko initially opposed last month`s revaluation of the hryvnia, overseen by the bank`s board, but now says new guidelines for a corridor in which the currency should trade should be worked out in the next few weeks.
"Naturally, we cannot allow this (a big gap between rates) and will undertake all measures within our power to ensure the rates remain close," Poroshenko told an investment conference.
"I would like to do away with the myth that the official rate will differ considerably from the real rate as that would place an additional fiscal burden on industry which would be paying what amounts to an undeclared tax."
He told the conference that the central bank`s action fitted in with a general need to cut record inflation -- more than 30 percent year-on-year in April -- but said the board should first have "synchronised" its moves with the government.
The hryvnia was revalued on May 22 to 4.85 to the dollar after being maintained in a band of 5.0-5.06 since August 2005 -- within a wider range of 4.95-5.25. The currency had for weeks, in the absence of central bank intervention, broken through the top end of the corridor.
The council`s initial opposition to the revaluation caused some confusion over policy. But the central bank has said it stands for flexibility that reflects market trends and has since slightly altered the official rate to 4.852 to the dollar.
Poroshenko said last month the central bank`s board should have agreed on how to broaden the corridor in which the currency is to be traded before revaluing it.
But central bank chairman Volodymyr Stelmakh overruled the council`s veto, saying the board had acted on grounds of economic necessity. Stelmakh said last week that the revalued rate of 4.85 was "optimal" but would be subject to market trends.