IMF presses Ukraine to devalue hryvnia – Bloomberg

The National Bank of Ukraine (NBU) has come under pressure from the International Monetary Fund (IMF) to devalue the national currency.

Source: Bloomberg, citing unnamed sources

Details: The IMF has emphasised the potential benefits of a controlled devaluation of the hryvnia as a measure that could help ease Ukraine's strained financial situation by increasing budget revenues denominated in the national currency.

Officials at the NBU are resisting such a move, citing risks of inflation and negative public reaction, the sources said on condition of anonymity as the talks are taking place behind closed doors.

Ukraine has received the bulk of the US$15.6 billion under the IMF programme agreed upon in 2023, and the two sides are now negotiating a new package worth up to US$8 billion.

IMF Managing Director Kristalina Georgieva is expected to visit Kyiv to demonstrate the Fund's support and to bolster Ukraine's efforts to secure additional financing.

A devaluation could increase nominal budget revenues since export contracts are denominated in foreign currencies. However, the expected benefits are limited as Ukraine's budget depends heavily on direct international aid, while devaluation could also fuel inflation, eroding fiscal stability.

Background: On 2 October 2023, the National Bank of Ukraine announced that it was abandoning fixed exchange rates. Starting from 3 October 2023, the official dollar rate began to fluctuate for the first time since July 2022.

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