In an interview with Dzerkalo Tyzhnya, a popular Ukrainian weekly, Victor Yushchenko has said achieving full convertibility of the hryvnya was one of the country’s strategic goals. He is convinced it is inexpedient and even risky to artificially reduce the nominal exchange rate, according to the President’s press-office.
“Full convertibility of the hryvnya is a strategic direction of currency policy. To achieve this goal, it is important to accelerate the development of the country’s financial system and state pension insurance, achieve budget surplus, make home prices independent of the currency exchange rate… and some other things,” he said, adding the terms depended on how well the government and the National Bank of Ukraine would improve market mechanisms.
The President said there were several positive changes in Ukraine’s economy and opined it would thus be wrong to “weaken” the hryvnya.
He believes this artificial devaluation can "trigger inflation, an outflow of capitals and deposits, and excessive “dollarization,” and undermine the banking system with insufficient currency balances.”
The Head of State believes the government should formulate a clear-cut economic strategy and improve the investment climate to reinvigorate the financial system.
Mr. Yushchenko characterized Ukraine’s currency market as stable but outlined a few risks.
“Ukraine’s economy is rather open and the share of export exceeds 50% of the country’s GDP. So, any serious outer shock such as a dramatic rise in energy prices or a slump in metal prices can ruin the macroeconomic stability,” he said.
The President also said the government and the National Bank must preserve the inner stability of the hryvnya to ensure Ukraine’s economic development.
“…I really want economic and social reforms to be implemented faster in our country. I think you will agree that such things as transparent privatization, well-managed markets of land, industrial goods, agriculture and services, legalization of the economy, anti-corruption efforts and other measures would only help stabilize the hryvnya,” he said.
“Reaching a consensus among Ukraine’s major political forces would give Ukraine a historic chance to assure the state attributes, the hryvnya being one of them," he said.