Speaking at the meeting with CEOs of the 150 largest Ukrainian business companies arranged by the European Business Association, Governor of the National Bank of Ukraine Valeriia Gontareva touched upon the problems of the foreign exchange market, explained what the estimated hryvnia exchange rate means and why it is where it is today, stressed the need to create the institute of market makers and emphasized the importance of collective responsibility in the context of wartime economy.

Valeriia Gontareva explained that as a result of historically-accumulated devaluation, since 2008 the hryvnia exchange rate had regularly been manually controlled. A huge amount of foreign currency reserves was wasted on propping up the exchange rate. ‘These processes did not go without leaving a lasting mark, and eventually, stability has translated into the built-up of imbalances. That the exchange rate was 8 UAH per US dollar and reached UAH 12 was no coincidence. It should have happened long time ago, once a decision was made to stop burning reserves and making our country uncompetitive’, Valeriia Gontareva emphasized.

Speaking about what the estimated hryvnia exchange rate is, Valeriia Gontareva said that it depends on how the country’s trade with main partners is going, how the currency exchange rate changes at that time, what the country’s trade balance with partners is and what the inflation rate is in these countries. ‘One has to understand that the estimated hryvnia exchange rate has nothing to do with what will happen on the market now. There is a rule that all estimated rates work in the context of balanced economy. We have a very tense situation in the eastern part of the country, but I believe that the ceasefire will last long and help restore peace, so we won’t have to switch to the wartime economy’, the Governor commented.

In her opinion, we all have to understand today that collective responsibility in the time of war means collective responsibility of businesses, banks and the government. Only this way we can win.

Presently, the regulator is involved in efforts to establish the institute of market makers. It’s being done for the sole purpose of building the right infrastructure of the foreign exchange market. Ms Gontareva said that an IMF mission has specifically visited Ukraine for that purpose at her invitation.

‘Recently, we have received a tranche from the IMF and a tranche from the World Bank. The money received from the World Bank will be allocated solely to finance the Deposit Guarantee Fund. Everybody has to clearly understand, and I think that it’s a very good signal for the market, that DGF will receive sufficient funding’, the Governor of the National Bank of Ukraine said.

She also said that today, the regulator is involved in efforts to purge the banking system: ‘Besides the banks engaged in illicit activities which we are taking out of the market, we also do real purging inside the National Bank.

‘We are disposing of non-core assets and carrying out a large-scale reshuffle’, the head of NBU emphasized. In addition, she says, the National Bank is set to undertake reforms. ‘For instance, we analyzed all refinancing resolutions and are presently bringing them in line with the world’s best practices. For the first time in this country we have brought the refinancing rate into resembling conformance with international standards’.

Wrapping up the meeting, Valeriia Gontareva said that the regulator had set itself the main goal of achieving macrostability, which meant predictable exchange rate and low inflation level in the medium-term perspective and stability of the nation’s banking system.