1 December 2016
The National Bank of
Ukraine presented a concept paper on
a new foreign exchange regulation model and a roadmap for
its implementation. The new model is
not only more liberal compared
to the current
but is more
in line with
international practice - Directive 88/361/EC on free flow of
capital and the Association Agreement with European Union.
New FX regulation model will be
implemented with help of new legislation, which will replace obsolete Decree of the
Cabinet of Ministers of Ukraine On Foreign Exchange
Regulation and Foreign Exchange Control System of 1993 and numerous legal acts.
From early November of the current year, working group is developing new
legislation with participation of experts engaged by the European Commission
within EU-FINSTAR project framework.
“As a result, new draft law On Foreign
Exchange, which is a single frame document that will outline main guidelines on
FX regulation in the country. At the same time, specific principles will be
introduced at level of regulations. - told NBU Deputy Governor Oleh Churiy. - Such approach will
make FX regulation in Ukraine transparent, simple and clear for households,
business and banks, and will enable NBU to react more promptly and effectively
on changes in balance of payment and market conditions.” According to project
schedule, first version of the draft law will be introduced
in Q2 2017.
Liberalization of FX regulation system on
the way to target model will be performed in several
stages, which can take place simultaneously:
· Stage0. On the
basic stage we intend to lift limits for export and
import operations and direct foreign investments aimed at improvement of export
capacities of our country.
· Stage1. On this
stage, limitations for portfolio investments and debt capital flows will be abolished.
· Stage2. On the
last stage, all obstacles for foreign financial transactions of individuals will be removed.
“Gradual shift to new FX regulation system
is linked to the fact that liberalization must not lead to disruption of yet
fragile macroeconomic and financial stability. That is why we must weight each step: assess
its potential effect and analyze consequences after the implementation, and
take the availability of favorable prerequisites into account”, stressed Mr Oleh Churiy.
We shall take into account following factors:
inflation level and economic growth, availability of significant gaps in
balance of payment, resilience of the financial system, adequacy of
international reserves, and development of financial markets and security of
invertors’ rights. In particular, temporary restrictions easing shall not lead
to inflation to exceed NBU targets. Moreover, if international reserves are not
sufficient provided excessive supply of foreign exchange in the interbank FX
market, NBU shall each time choose between temporary restrictions easing and
purchase of foreign exchange to build-up reserves.
For the complete transition
to a more liberal FX regulation model, efficient tax regulation
shall take the stand of
strict monetary regulation. NBU
initiated and the Tax
and Customs Policy Committee of the Verkhovna
Rada has prepared for consideration
in parliament two draft laws, which are to
introduce in Ukraine 5 key and
most urgent among 15 EBRD recommendations on countering the
tax base reduction and moving
profits abroad - BEPS).
They also provide for Ukraine’s
joining the mechanism of Automatic
Exchange of Information with the fiscal
authorities of other countries.
according to recommendations of the National Council of Reforms of 25 October
2016, public discussion of initiative on BEPS counteraction is still on. First discussion took place on 30 November 2016 within framework of
meeting of Financial Sector Reform Task Force, in which participated
representatives of the NBU, the National Commission for the State Regulation of
Financial Services Markets, the National Securities and Stock Market
Commission, the Project Office of National Council of Reforms, the Independent
Association of Banks of Ukraine, Insurance Federation of Ukraine and also
representatives of people’s deputies corps and expert community. Revised according to results of discussion,
draft laws will be submitted to the National Council
of Reforms for the further passing to the Verkhovna Rada of Ukraine.