Will the dollar reach 50 hryvnia? An economist assesses the risks for the hryvnia
11 June 13:13
PROGNOSIS
The official exchange rate of the dollar in Ukraine has once again approached the psychological threshold of 45 hryvnias and reached a new all-time high. Against this backdrop, Ukrainians are paying closer attention to the currency market and trying to understand whether the hryvnia could weaken sharply in the near future.
Economist Oleg Getman, in an exclusive comment
Is there a risk of a sharp rise in the dollar
Oleg Getman emphasizes that the current situation on the currency market does not indicate a threat of a sharp jump in the exchange rate.
“There are no fundamental factors for any further growth. Our gold and foreign exchange reserves are at one of the highest levels in Ukraine’s history. There is about $45 billion there,” the economist noted.
According to him, the high level of international reserves allows the National Bank to control the situation on the foreign exchange market and smooth out excessive exchange rate fluctuations.
Hryvnia devaluation is factored into the budget
The economist explains that the gradual weakening of the hryvnia is not a surprise. Such a scenario, he says, was anticipated in the state budget.
“The gradual devaluation of the hryvnia is something that, in principle, our government has factored into our budget. This is what the National Bank will implement over the course of the year, but very, very gradually,” Hetman explained.
He predicts that the National Bank will continue to act cautiously, preventing sharp fluctuations in the exchange rate.
“Once every six months or so, by devaluing the hryvnia by one unit—one hryvnia per dollar—the National Bank will act in this manner,” the expert noted.
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Why the hryvnia is gradually weakening
Hetman cites a significant trade deficit as one of the reasons for the gradual devaluation. Ukraine imports far more goods than it exports, which puts additional pressure on the currency market.
“Our trade deficit is massive. We export about 30 billion a year, while we import goods worth about 70 billion,” the economist said.
Due to this imbalance, more currency leaves the country than comes in from exports. At the same time, according to Getman, this difference is largely offset by international financial aid.
“International donors, of course, make up for all of this, because they provide us with $40–50 billion a year in various forms of aid—macro-financial assistance, grants, and loans,” the expert noted.
Why the government is interested in a weaker hryvnia
According to Getman, the Cabinet of Ministers is interested in a certain weakening of the hryvnia, as this could partially improve the trade balance and impact budget indicators.
“It would be desirable to improve our trade balance slightly. That is why the Cabinet of Ministers insists that the hryvnia should depreciate slightly,” the economist explained.
At the same time, the National Bank does not always fully agree with the government’s approach, as its task is to maintain currency stability and control inflationary risks.
“The National Bank sometimes agrees with the Cabinet of Ministers, sometimes it doesn’t. But, as we can see, in recent months the National Bank has been playing along somewhat with the model laid out by the Cabinet of Ministers,” said Getman.
What the dollar exchange rate might be by the end of the year
Despite the dollar’s new all-time high, the economist does not expect a sharp devaluation of the hryvnia. In his opinion, the exchange rate will rise very slowly and could approach 46 hryvnias per dollar by the end of the year.
“That is, a very, very slow, gradual devaluation. By the end of the year, we may see a maximum of 46. We won’t see it go any higher,” predicts Oleg Getman.
Thus, the expert believes that the current rise of the dollar is part of a controlled process, not a signal for currency panic. The key factors remain the volume of international reserves, assistance from partners, the trade balance, and the policy of the National Bank.
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