The hryvnia exchange rate is supported by $50 billion in reserves: Novak explained who is actually supporting the stability of the domestic currency
25 February 16:36
Ukraine has been living in a relatively stable currency corridor for several years, even amid full-scale war. Record gold and foreign exchange reserves and external financial assistance allow the National Bank to maintain the hryvnia exchange rate, despite a 50% budget deficit and ongoing military spending.
Andriy Novak, head of the Committee of Economists of Ukraine, spoke about this in an interview with the YouTube channel "Komersant Ukrainian".
“First, we must acknowledge that the National Bank of Ukraine’s gold and foreign exchange reserves currently exceed $50 billion, which is a record high. We did not have such reserves even in the best, most prosperous years of peace,” he said.
According to the economist, the source of this financial “safety cushion” is primarily international support. It comes in two key areas: directly to the National Bank to replenish reserves and to the government to cover the record budget deficit.
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“50% of our budget is in deficit. That is, 50% of the expenditure side is a deficit, which is mainly or almost entirely covered by our Western and other partners,” he adds.
Novak emphasizes that the currency market remains relatively calm also due to structural changes in the war economy: a reduction in imports and exports, as well as a significant amount of material assistance that does not require currency expenditures.
“In other words, the National Bank currently has more than enough gold and foreign exchange reserves to maintain a relatively stable hryvnia exchange rate, given the conditions of war. This adjustment must always be made, because war undoubtedly affects everything,” he adds.
In addition, according to him, Ukraine is holding on thanks to a large-scale international support coalition — more than 60 countries and virtually all international organizations are providing financial, humanitarian, and military assistance.
“Thanks to this large-scale external support, we are largely standing our ground and have the opportunity to fight as we are fighting, that is, to defeat the former second army of the world. And to maintain our civilian life as much as possible in wartime conditions,” he added.
Thus, the current stability of the hryvnia is not only an internal economic indicator, but also the result of systematic international support, which allows Ukraine to simultaneously finance its defense, maintain its budget, and preserve macrofinancial stability in the conditions of full-scale war.
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