A 10% rise in the dollar on the black market poses problems for official exports

The National Bank responded professionally to Russia's military invasion of Ukraine on February 24 by fixing the dollar on the interbank market at UAH 29.25 / $ to stop the panic and sharp devaluation of the hryvnia that occurred in 2014-2015. The cash exchange rate of the dollar in the first weeks of the war rose to 37-38 UAH / $, but then fell to 32-33 UAH / $.

However, starting from May 13, the dollar on the black market rose by 10% to 36-37 UAH / $ on news of the possible resumption of interbank trading by the National Bank and the transition to a floating exchange rate, as well as rising demand for cash due to increased car imports after cancellation of customs clearance payments.

Since April 14, there have been three exchange rates in Ukraine: the official fixed rate of UAH 29.25 / $ fixed by the NBU, the bank exchange rate not exceeding UAH 32.17 / $, and the black market rate already reaching UAH 36-37 / $.

On May 21, the NBU lowered the limit on cash withdrawals abroad to UAH 50,000 per month to avoid cash currency speculation, and lifted exchange rate restrictions for banks, which will now be able to sell the dollar more than UAH 32.17 / $ and increase competition with black market. At the same time, there was no limit for payments abroad by card.

The NBU believes that such years will reduce the cash exchange rate, although in the non-cash segment restrictions remain unchanged, and banks should conduct transactions of purchase and sale of currency at a rate not exceeding the official rate of + 1%.

At the same time, exporters will sell currency to banks at the rate of UAH 29.25 / $, which will provide importers with currency for critical imports and will help curb rising prices for imported goods and, consequently, inflation.

Exporters could receive only UAH 2,925 for the sale of 100 non-cash dollars, while on the black market they would receive UAH 360-3,700. This will encourage them to sell goods for cash and restrain the sale of currency.

To stabilize the exchange rate requires a resumption of exports of agricultural and metallurgical products. The National Bank reports that a return to a floating exchange rate is possible only if the following conditions are met:

• stabilization of export earnings,
• reduction of military uncertainty,
• intensification of the financial market so that the NBU could influence inflation by changing the key rate.

None of these conditions are met yet, so the National Bank cannot predict when it will return to a floating exchange rate.