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Speech by NBU Governor Yakiv Smolii on the Currency and Currency Operations Draft Law №8152 at Verkhovna Rada of Ukraine

21 June 2018

 

 

Dear Members of Parliament,

 

We urge you to support the draft law "On Currency and Currency Operations". Now your voices are able to bring Ukraine to the long-awaited freedom to carry out foreign exchange operations according to the European model. Currency restrictions will be phased out, and eventually, businesses and individuals will be able to make independent decisions on when and how to conduct foreign exchange transactions.

 

Indeed, this will not happen in one day - we will remove the restrictions gradually and carefully so as not to impair financial stability. However, the adoption of the law gives the "green light" to cancel the most painful restrictions as soon as it enters into force. For example, the ones regarding investing abroad and foreign trade operations.

 

At the same time, the greater is freedom in conducting foreign exchange operations, the greater is vulnerability of the economy to various shocks, which are usually impossible to predict. If risks rise, capital flees out of the country much faster if there is has nothing to restrain the outflow. The consequences are understandable: hryvnia depreciation and acceleration of inflation. Afterwards, the economic and financial crises.

 

Price and financial stability are a priority of the National Bank. Thus, the lack of anti-crisis powers will limit the ability of the regulator to carry out a rapid and large-scale FX liberalization. The draft law does not imply the extension of the powers of the National Bank. It only gives the National Bank the opportunity to react timely and effectively to signs of a crisis and prevent it from unfolding, regardless of its nature.

 

The "freedom plus safety" approach is a standard practice of central banks. Therefore, the importance of adequate anti-crisis powers and instruments of the National Bank is also emphasized by international partners of Ukraine - the IMF, the EBRD, and the European Commission.

 

Your support for the law in the proposed wording will create favorable, transparent and safe conditions for doing business in Ukraine and open the door to foreign investors. In addition, Ukrainians will thank you for the right to invest in securities on global markets and deposit funds on the accounts of any banks in the world.

 

Thank you!

 


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Last modification   21.06.2018