Page 45 - UKRRptNov19

7.0 FX
Despite the cuts, Ukraine still has the highest prime rate in Eastern Europe. Drawn by these high-interest rates, foreign investors have invested a net $3.5bn in Ukrainian government hryvnia bonds since this start of this year. This influx of money has boosted the hryvnia against the dollar by 12.5%, making it the best performing currency against the dollar this year.
Prime Minister Oleksiy Honcharuk predicts the hryvnia will trade next year in a band of 25 to 27 to the dollar. Currently, the hryvnia trades at 25 to the dollar, a 12.5% appreciation since the start of the year. On Tuesday, Economy Minister Milovanov predicted Ukraine’s GDP will rise by 3.5-3.7% in 2020, up from the 3% growth forecast for this year. He also said inflation could fall to 5.5% at the end of next year.
Starting October 30, Ukrainians and foreigners can buy as much foreign currency from banks as they want. And buyers no longer have to submit documents justifying their purchases. The latest in a year-long easing of foreign currency controls, the new rules scrap the old daily limit on foreign currency purchases -- $6,000. To justify the liberalization, the National Bank of Ukraine notes that it has brought a net $4bn this year as foreign buyers flood the Finance Ministry’s weekly bond auctions. At the same reserves are around $21-22bn, enough to cover three months of imports.
The remittances of Ukrainian labourers abroad rose 5% y/y to $5.5bn in 1H19, the National Bank of Ukraine (NBU) reported on Sept. 25. According to the NBU estimate, around half of remittances were transferred through informal channels, while the rest occurred via banking transfers and international money transfer systems. The 1H19 remittances accounted for about 8.6% of GDP. Around one-third of labour remittances come from Poland, followed by the Czech Republic, Russia and the US. The remittances of labour migrants are essential for Ukraine's economy as they restrain the enlargement of the current account (C/A) deficit amid a negative trade balance. Moreover, the money transfers are apparently contribute to the ongoing appreciation of the Ukrainian national currency. The current fast growth in private consumption implies that a big chunk of money transfers immediately moves to the domestic ForEx for exchange.
The National Bank of Ukraine (NBU) is going to cancel the daily limit for the purchase of currency and bank metals starting from November 5, the regulator said on its Facebook page on October 29. The requirement for individuals to submit documents to the bank confirming the grounds for conducting operations to purchase non-cash foreign currency is also terminated, the central bank said in a statement as the regulator continues to wind down capital controls introduced in the worst of the recent crisis years. According to the NBU, these moves will not have a significant impact on the foreign exchange market. "The vast majority of transactions by individuals to purchase foreign currency are carried out in amounts less than UAH150,000, and the total volume of purchase and sale of foreign currency by the population today is commensurate." The NBU reduced the maximum allowed amount of payments in hard cash for individuals from January 4 from UAH150,000 ($5,535) to UAH50,000 ($1,845). This amount will be permitted for transactions between individuals and enterprises (entrepreneurs) within one day, as well as payments between individuals under the contracts that are subject to notarisation. Individuals can make payments in excess of
45 UKRAINE Country Report November 2019 www.intellinews.com