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NBU and EBRD Sign USD 0.5 Billion FX Swap Agreement

NBU and EBRD Sign USD 0.5 Billion FX Swap Agreement

The NBU and EBRD have agreed to set up a USD 0.5 billion FX swap facility to support the real economy and strengthen Ukraine’s macrofinancial stability as the world struggles to combat the economic fallout from the coronavirus pandemic.

FX swap transactions with the NBU will enable the EBRD to secure reliable access to hryvnia liquidity to increase the availability of hryvnias to local businesses impacted by the pandemic. In particular, the funds will be used to support companies’ urgent liquidity, short-term working capital, and trade finance needs, while limiting exchange rate risk.

At the same time, buying foreign currency from the EBRD on swap terms will help the NBU increase Ukraine’s international reserves. This will have a positive impact on financial market sentiment and strengthen the NBU’s capability to pursue its mandate of maintaining price stability.

The FX swap facility terminates in two years but can be renewed. The minimum amount of one tranche under the FX swap agreement is USD 25 million. Each tranche comes with a minimum term of up to three months and can be rolled over.

Exchange rate parameters of FX swap transactions will be determined on the basis of differentials between interest rates on hryvnia and dollar funds. The cost of hryvnia liquidity will be based on the NBU’s key policy rate, while that of dollar funds will be calculated using an interest rate tied to the SOFR – a modern international benchmark rate that is based on transactions in the money market where investors offer banks overnight loans backed by their bond assets.

The NBU and EBRD are expecting to execute the first transaction under the FX swap facility in the next few weeks.

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