Ukraine Forces Conversion of Foreign-Currency Revenue
Ukraine’s central bank will order the former Soviet republic’s exporters to sell foreign currencies earned abroad to stabilize the balance of payments.
The Natsionalnyi Bank Ukrainy will require companies to convert half their foreign-currency revenue to hryvnia, spokesman Oleksandr Kutereshchyn said by phone today. Individuals receiving more than 150,000 hryvnia ($18,342) from abroad will also be required to sell.
The International Monetary Fund, which froze Ukraine’s $15.4 billion loan program in March 2011 after the Cabinet refused to raise utility prices, urged policy makers to adopt a more flexible exchange rate. Foreign reserves plunged 8.5 percent last month to $26.8 billion, the lowest since May 2010, as the central bank propped up the hryvnia.
“We expect pressure on the exchange rate to ease,” Vladislav Sochinsky, a treasury executive at the Kiev-based unit of Citigroup Inc., said by e-mail today. “This norm shouldn’t be considered a permanent solution, as further progress with the IMF, in particular developments on a new program, will have more of a stabilization role.”
The hryvnia traded to 8.178 per dollar as of 4:25 p.m. in Kiev from 8.171 on Nov. 19. The currency, which lost 44.61 percent to the dollar between September 2008 and September 2009, was stabilized in the following two years by central bank support. It has declined 1.6 percent this year.
Lawmakers supported the obligatory conversion of foreign- exchange earnings on Nov. 6 to stabilize the weakening hryvnia, which is under pressure from the widening deficit of the current account, the widest measure of money flowing in and out of the country.
The gap widened to $9.3 billion in the first nine months of the year from $5.9 billion in the same period of 2011 as demand for exports such as steel slumped on world markets and energy imported costs rose.
Both the laws for individuals and for exporters will remain in force for six months, according to the central bank, which set a 90-day term for payments for export and import operations to be settled.
President Viktor Yanukovych’s Party of Regions submitted Nov. 16 a bill to introduce a 15 percent tax on individuals’ foreign-currency sales, according to parliament’s website. The proceeds will go to the Pension Fund, according to the bill.
Individuals who receive less than equivalent of 150,000 hryvnia from abroad a month and sell the foreign currency immediately, wouldn’t have to pay the tax, according to the draft bill.