IMF updates exchange rate forecast: experts explain whether the hryvnia is at risk of collapse
22 October 10:01
The International Monetary Fund (IMF) has updated its baseline exchange rate forecast to about 50 UAH per dollar in 2029. This is a signal of a smooth trajectory rather than a collapse.
However, economists emphasize that a rapid depreciation of the hryvnia is not expected due to record foreign exchange reserves, a regime of managed exchange rate flexibility, and the absence of a rush in the foreign exchange market.
How the course of the war, energy attacks and the rhythm of external financing will affect the domestic economy and the welfare of Ukrainians, – said the expert
What exactly does the IMF predict and how to “read” this signal
The update of the IMF forecast is an important signal to economic players: international institutions do not include a shock weakening of the hryvnia in the baseline scenario. The forecast is not a promise of the exchange rate “on the board,” but it is a framework within which government policy and market expectations can interact without panic scenarios.
Rapid depreciation of the hryvnia will not happen: does the forecast correspond to reality
Economic expert Andriy Novak in an exclusive commentary for
Today, there are no particular risks for the hryvnia against other hard currencies. “Given all the circumstances of the full-scale war, which has resulted in the temporary occupation of about 20% of our territory (these are very industrial and agrarian areas in the East and South of Ukraine), the hryvnia exchange rate remains relatively stable for a country that is suffering from such a large-scale war,” Novak said.
According to the expert, the key buffer is reserves:
“Ukraine now has record gold and foreign exchange reserves, the National Bank of Ukraine has more than $44 billion,” the analyst explained.
In turn, economist Oleh Hetman, who also spoke with
“We can confidently say that there will be no rapid depreciation of the hryvnia. Now the exchange rate is being formed exclusively in the mode of managed flexibility, which means that the National Bank smooths out any fluctuations,” Mr. Hetman assured.
The expert also emphasized the state’s foreign exchange reserves, which have recently reached their peak.
“The NBU’s foreign exchange reserves are over $46 billion. This is a record, an absolute maximum for all times of independence. Thanks to the contributions of our international partners, which will continue, the hryvnia will hold its position,” the economist explained.
“Hence the expectation of a very smooth movement:
“The maximum that it (the NBU – ed.) will do is a very gradual devaluation, for example, by 1 hryvnia per year. This year, from 41 hryvnia, we are heading to 42 hryvnia by the end of the year. Next year (we will have a rate of 42-43 hryvnia – ed.). This is the maximum that the National Bank can afford, because it primarily targets inflation,” Hetman summarized.
Why the hryvnia is holding on: three pillars of stability
The first pillar is foreign exchange reserves. Even with the difference in estimates (>$44 billion or >$46 billion), experts say they are record high. This provides the NBU with intervention resources to smooth out peak fluctuations and maintains confidence in the managed flexibility regime.
The second pillar is managed exchange rate flexibility. The NBU targets inflation, and uses the exchange rate as one of the tools to contain price pressures. The market’s habit of smooth, predictable exchange rate movements reduces the likelihood of short-term “currency tantrums.”
The third pillar is foreign aid. As economic expert Andriy Novak emphasized, “the bulk of those reserves is financial support for Ukraine… virtually all international financial and economic organizations, including the IMF.”
Oleg Hetman, in turn, assured that such support “will continue,” which strengthens the NBU’s ability to stabilize the market.
Hryvnia stability and risks that cannot be ignored on the way to it
Despite the mostly optimistic forecasts, experts do not rule out force majeure circumstances.
Andriy Novak warns against them:
“Of course, unless some incredibly negative large-scale events occur directly at the frontline in Ukraine’s favor, there may be a disruption due to some kind of panic.
However, at the time of this comment, Novak himself emphasized that “the front line is generally standing still,” and the Russian army is “depleting much faster.” Therefore, there is every opportunity to maintain a relatively stable hryvnia exchange rate both now and in the coming years.
In addition, the economist emphasized, Ukraine is conducting very effective pinpoint strikes deep into the territory of the Russian Federation, against its energy facilities, oil and gas refineries, pumping stations… And this is causing extremely great damage to the Russian economy.
And then there are the international sanctions against Russia. Ukraine, on the contrary, has not sanctions, but large-scale support, in addition to military support, the greatest financial and economic support,” Novak said, listing factors that could affect the stability of the hryvnia exchange rate against major world currencies.
On the macro level, the risks are also associated with energy attacks, the rhythm of external financing, and global shocks that affect import prices, the balance of payments, and ultimately business expectations.
Read also: Big Mac Index: the dollar exchange rate in Ukraine should be 22 hryvnia
IMF changes the reference rate: what it means for businesses and households
Planning of foreign exchange costs and pricing policy can be based on the scenario of slow devaluation rather than on exchange rate spikes. This makes it easier to price import-dependent industries, enter into contracts with currency clauses, and manage working capital.
Experts are already advising companies to
- distribute foreign currency payments over time, avoiding concentrations in certain periods;
- combine forward instruments, foreign exchange earnings and short insurance positions for critical purchases;
- synchronize pricing decisions with the NBU’s inflation targets, which, due to the dollar, keeps inflation in the single digits: less than 10%.
As for the impact of the IMF’s updated dollar forecast, its impact on ordinary Ukrainians should be viewed through a different lens.
The absence of a rush in the cash and non-cash markets, as pointed out by expert Andriy Novak (according to him, “there is no rush, no queues at exchange offices. The situation is calm”), allows households to plan large purchases and foreign currency savings without fear of sudden exchange rate shocks.
In the short term, the logic is simple: hryvnia deposits with a real positive rate of return against inflation can compete with a “currency mattress” if inflation does indeed remain in the single digits.
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Political component of the economy: what the government controls and what it does not
The exchange rate is a derivative of many variables. The state controls the exchange rate regime, interventions, fiscal and debt policies, and capital import/export regulations. But it does not control the war, global energy prices, private remittances, or the speed of export recovery. That is why the IMF’s forecast should be interpreted as a baseline trajectory, provided that external support and a managed macroeconomic policy are maintained, and not as a fixed course.
Consensus of experts interviewed
For businesses, this means a more predictable exchange rate framework and the ability to plan. And for households, there are fewer reasons to panic and more sense in making a rational choice between hryvnia and foreign currency savings instruments.
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