Ukraine May Relax Capital Controls in 1-2 Months, Sologub Says

Ukraine’s central bank may start easing capital controls, in place for more than a year, in one to two months if the hryvnia stays stable, its acting deputy head said.

“It’s always easy to introduce restrictions, it’s always difficult to wind them down,” Dmytro Sologub said Friday in an interview in Washington. “If we assume conditions are stable, something probably will start to move in the next 30-60 days.”

Ukraine will discuss any potential loosening of the measures with the International Monetary Fund, which has led a $17.5 billion rescue loan to the government, Sologub said.

Ukraine imposed capital curbs as three months of deadly protests and a Russian-backed insurgency in its easternmost regions sparked panic among investors and pushed the economy into its deepest recession since 2009. The hryvnia lost almost 48 percent against the dollar last year and has weakened more than 24 percent in 2015, the world’s worst performance, according to data compiled by Bloomberg.

The exchange-rate adjustment is almost over, according to Sologub, who said the hryvnia is “more or less balanced.” The currency is supported by last month’s increase in the central bank’s benchmark lending rate to 30 percent, which Governor Valeriya Gontareva called a reaction to investor “panic.”

That rate isn’t “a sustainable solution for next 6 to 9 months,” Sologub said. “We can see at some stage a decrease in the discount rate. So far, it’s difficult to say when.”

Inflation, which reached 45.8 percent in March, “is one of the most important problems Ukraine is facing,” the deputy governor said. Data show prices for domestic consumer staples have begun to fall because of the stable hryvnia rate, he said.

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