Should we expect devaluation to 45 hryvnia per dollar: what economists predict?
12 August 15:07
ANALYSIS
The Ministry of Finance of Ukraine has included in the draft state budget for 2025 an average annual hryvnia exchange rate of 45 UAH per dollar, while the exchange rate has been fluctuating between 40 and 42 UAH for most of this year. "Komersant Ukrainian" asked domestic economists whether this means that we should expect the exchange rate to rise soon and to what extent the hryvnia could devalue by the end of the year.
Financial analysts and economists emphasize that the current exchange rate is more of a calculated and conservative scenario, and that the current stability of the hryvnia is supported by international aid and record reserves of the National Bank of Ukraine (NBU). At the same time, they do not rule out a moderate appreciation in the fall due to seasonal factors.
The budgeted exchange rate is not a target, but an estimate
Economist Oleksandr Okhrimenko interprets the budgeted exchange rate as a purely calculated indicator, not a mandatory target.
“Don’t get me wrong, when the Ministry of Finance puts the dollar exchange rate in the budget, it is an estimated figure. Our budget is calculated in hryvnia, but there are some payments in foreign currency, such as customs duties and so on. In order to convert the currency into hryvnia, the so-called estimated exchange rate is used,” explains Okhrimenko.
He emphasizes that the Ministry of Finance and the government are not obliged to ensure this exchange rate, and even if the average annual rate is lower – for example, 40-41 UAH – it will not have any consequences.
“The Ministry of Finance used 45. Why? As a rule, experts decide and think there. But neither the Ministry of Finance nor the government is obliged to make the average annual exchange rate equal to 45. This is an estimated figure,”
– the economist elaborates.
At the moment (August 12), the official exchange rate is 41.44 UAH/USD and is affected by seasonal factors, including the summer decline in demand for foreign currency.
“Our exchange rate is now very actively influenced by the desire of Ukrainians to buy and sell currency. The demand for foreign currency has decreased. Some explain it as summer, people spend more money, save less, and earn less,”
– he notes.
The government is playing it safe, but the signal is negative
Economist Andriy Novak emphasizes the traditional practice of Ukrainian governments to budget for a higher hryvnia-to-dollar exchange rate than the one that was in effect at the time of the project submission.
“The practice of past years shows that almost all Ukrainian governments, regardless of political affiliation, have included in their draft state budgets for the next year a higher hryvnia-to-dollar exchange rate than was the case at the time of submission of the draft budget,”
– explains Novak. According to him, this is done for reinsurance, laying down the so-called “worst-case scenario,” which later, as a rule, turns out to be softer than reality during the fiscal year.
The expert notes that the current government is no exception and is likely to set a higher exchange rate than the current one. On the one hand, this approach is correct to avoid risks, but on the other hand, it sends a negative signal about the continued devaluation of the hryvnia.
“Perhaps, on the one hand, this is the right approach, to lay down a worst-case scenario, to be on the safe side. But on the other hand, it sends a negative signal every time that the hryvnia devaluation will continue,”
– comments Novak, calling it a dilemma between budget execution and the reality of “creeping” devaluation.
Читайте нас у Telegram: головні новини коротко
Will there be a big devaluation?
Regarding the prospects for devaluation in the near future, Andriy Novak assures that there are no serious preconditions for it.
“Today we have no prerequisites for any serious devaluation of the hryvnia. Ukraine receives sufficient assistance during the war, not only military but also financial. The National Bank of Ukraine now has record foreign exchange reserves of $43 billion. We did not have such reserves even in the best peaceful years,”
– emphasizes the expert.
According to him, these factors allow the NBU to maintain a stable exchange rate, as there is no excitement or panic about foreign currencies in the market.
“Any devaluation or significant fluctuations can be caused by artificial speculation in the currency market by players, mainly banks,”
– the expert notes, not pointing to a specific devaluation limit by the end of the year, but emphasizing overall stability.
Billions “in circles” that do not affect the exchange rate
Economist Oleksandr Okhrimenko adds that the NBU sells $2-3 billion a month to importers, mainly the military, who buy components for drones, equipment, and repairs. However, this operation is “technical,” he notes, as Ukraine receives similar amounts from foreign partners.
“At the moment, the currency sold by the National Bank is bought by importers, but usually by so-called military importers who buy components for drones, for repairing equipment, and military equipment. Every month or so, the National Bank of Ukraine sells 2-3 billion dollars, but every month or so, our foreign partners give us 2-3 billion dollars, sometimes more, through various channels to finance our army. So this money, so to speak, is running around in circles somewhere, and it does not significantly affect the exchange rate,”
– Okhrimenko explains.
According to him, the population is not actively buying foreign currency, which is typical for summer. However, the economist suggests that the situation may change in the fall, when demand increases and the exchange rate “may rise.”
Summary
In general, experts agree that a sharp devaluation of the hryvnia is not expected by the end of the year, but seasonal and speculative factors may lead to a moderate increase in the exchange rate. This is in line with the general trend of conservative budget planning in times of war, when stability is ensured by foreign aid and NBU reserves.
Читайте нас у Telegram: головні новини коротко
