The National Bank of Ukraine has decided to abandon the peg of the national currency to the US currency and peg it to the euro.
In the near future, the hryvnia exchange rate will be determined not by the US dollar, but by the euro, whose share in settlements in Ukraine continues to grow. "Apostrophe" found out what this would mean for the country and its citizens.
The National Bank of Ukraine is considering the possibility of pegging the exchange rate of the hryvnia to the euro instead of the US dollar. This was reported by the regulator itself.
Recall that all the time of the existence of the hryvnia as the national currency of Ukraine, its exchange rate against other currencies of the world is determined in relation to the US dollar. Accordingly, the exchange rates of all other currencies against the hryvnia are set through its cross rate against the dollar.
But in the near future, the situation may change.
"The currency structure of transactions in the foreign exchange market of Ukraine confirms the status of the US dollar as the main exchange rate currency. At the same time, in the segment of banks' transactions with customers, the share of transactions in euros in the total volume has tended to increase since pre-war times, the National Bank said. - In particular, the share of transactions in euros for the purchase of non-cash foreign currency by customers came close to 50%. The continuation of this trend, taking into account Ukraine's European integration aspirations, may in the near future actualize the issue of the feasibility of switching from the dollar to the euro as the main currency of the exchange rate peg."
Currency European integration
So why the NBU decided to change the main foreign currency is, in principle, understandable.
"The reason for this is obvious – European orientation and in the future integration into the EU," financial analyst Andriy Shevchyshyn told "Apostrophe". - The idea of switching to the euro (regarding exchange rate formation) has been floating around for a long time, and this was discussed even before the war, as the number of euro transactions has increased significantly. Therefore, this is a logical step, moreover, necessary for European integration processes."
But what can we expect in this direction next?
"Theoretically, the euro should become a more popular currency in Ukraine, firstly, because of our European integration, and, secondly, because of the expansion of the euro zone itself," economist, ex-member of the NBU Council Vitaliy Shapran told "Apostrophe". - The time of such a transition will depend on the speed of both processes. Another important factor will be the intensity of the EU's participation in the reconstruction of Ukraine. All these processes are long-term and will last for more than one year."
Another important question is how will the exchange rate reorientation affect ordinary Ukrainians?
"For the population, by and large, nothing will change," Andriy Shevchyshyn believes. "The euro will be more popularized within the country as a saving currency, a currency of conversion."
For the economy, the peg to the euro is also more likely to be positive.
"There should be no serious difficulties, because the euro is the currency of our established trading partners," Oleksandr Paraschiy, director of the analytical department of the investment company Concorde Capital, told "Apostrophe".
Therefore, for the most part, the transition to the euro should bring advantages.
"European integration processes, European contracts will be much easier to conduct and maintain. I don't see any significant disadvantages, - says Andriy Shevchyshyn. - The only thing is that it will be necessary to reformat the movement of funds, and at first this will add a headache to the banking sector. This also applies to state reporting and other parameters, such as, for example, the interbank market."
Not in the near future
Regardless of when Ukraine formally joins the European Union, European integration processes in our country will deepen. This begs the question, will we be able – and when – to start using the euro as a currency for domestic settlements?
Andriy Shevchyshyn believes that this is a very distant prospect.
"The eurozone is a completely different matter, completely different rules. I believe that in the horizon of ten years this is not considered at all, since we need an independent policy, including that of the National Bank and the Ministry of Finance, so that we can be freer in our decisions and incentive programs, especially in the post-war period," the expert stressed.
"The National Bank will definitely not agree to this – this is a matter of independence of monetary policy," adds Alexander Paraschiy. "Although Ukrainians might be happy about it."
But in any case, now the euro will increase in our country.
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