Ukraine's regulator explains move to allow banks selling foreign currency at any rate

23 May, 12:00 PM
NBU (Photo:National Bank of Ukraine / Flickr)

NBU (Photo:National Bank of Ukraine / Flickr)

The National Bank of Ukraine (NBU) believes that the move to allow banks selling currency at market rates minimizes cash withdrawals abroad, Oleksiy Lupin, director of the NBU's Open Market Operations Department told Interfax news agency on May 21.

According to Lupin, almost six million refugees from Ukraine are currently abroad, and the daily volume of transactions abroad on Ukrainian hryvnia cards is about $100 million puts significant pressure on the country's financial reserves.

"We have a $100 million outflow on our cards every day," he said amid the NBU's decision to lift restrictions on the exchange rate at which banks write off hryvnia funds from customers' accounts if customers pay with hryvnia cards abroad or withdraw cash from cards.

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"Thus, the NBU creates opportunities for convergence of the currency conversion rate for those who are temporarily abroad and the rate of purchase of cash currency for those who remain in Ukraine."

The regulator has also halved the limit for withdrawing currency at ATMs abroad from hryvnia cards to UAH 50,000.

"It also minimizes 'card tourism,” Lupin said. "According to available data, a significant part of hryvnia card transactions abroad is cash withdrawals from ATMs. This cash is then returned to Ukraine and enters the illegal cash market. That is, de facto scarce foreign exchange resources that can be spent on non-priority needs for wartime, which is now very important to minimize."

Lupin believes that equalization of the conditions of direct and indirect purchase of currency by the population is a measure that will prevent unproductive withdrawal of capital and protect the country's international reserves.

On May 21, the NBU lifted restrictions on setting the exchange rate at which authorized institutions can sell cash foreign currency to customers. Previously, the relevant rate should not deviate from the official one by more than 10%.

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