Saturday, 20 August 2011

Ukraine To Allow Hryvnia To Fluctuate As Much As 5% A Year

KIEV, Ukraine -- Ukraine will allow the hryvnia to fluctuate as much as 5 percent annually to comply with International Monetary Fund demands, First Deputy Central Bank Governor Yuriy Kolobov said
“We have certain obligations to the IMF to increase the amplitude of the hryvnia fluctuation,” Kolobov said today at a press conference in Kiev.

“There are no grounds for sharp revaluation or devaluation.” The bank didn’t see any reason for the hryvnia to fluctuate annually either way by more than 2 percent to 5 percent, he added.

Ukraine’s central bank controls the hryvnia exchange rate by buying and selling foreign currency on the interbank market.

In July, the bank bought $837.8 million and sold $1.1 billion, allowing the hryvnia to depreciate 0.16 percent, according to Bloomberg data.

The hryvnia rose less than 0.1 percent to 7.9985 as of 5:32 p.m. in Kiev from 8.0000 yesterday.

Ukraine has $38.2 billion in gold and foreign currency reserves, Kolobov said.

The nation’s central bank hopes to reach an agreement with the IMF to unlock lending frozen for the sixth month, Kolobov said, adding that the Washington-based multilateral lending agency “doesn’t’ have any questions for the central bank.”

An IMF mission will visit Ukraine to review government policies from Aug. 29 till Sept. 9 as the country seeks $3 billion in assistance by the end of next month, Deputy Prime Minister Serhiy Tigipko said June 22.
Ukraine obtained its second IMF bailout in three years last July after the global recession cut demand for exports and the budget deficit swelled.

The country has so far received two payments totaling $3.4 billion.

A third, expected in March, was delayed after the government failed to raise the retirement age and increase household energy prices to help balance the budget, conditions set by the IMF.

“We followed our state budget agreements with the IMF, we set up a special regulator that is responsible for utility tariffs, we adopted a pension law,” said Anatoliya Myarkovskyi, first deputy finance minister, at the same press conference.

The financial situation at the state-run energy company NAK Naftogaz Ukrainy is the “hottest” topic in current discussions with the IMF, he said.

The IMF wanted Ukraine’s government to raise natural gas prices for households to eliminate Naftogaz’s budget deficit so it doesn’t put pressure on the state budget.

Myarkovskyi said the government’s budget deficit reached 8.6 billion hryvnia ($1.1 billion) in the first seven months of the year, more than three times less than in the same period a year earlier.

Inflation will reach around 10 percent this year before slowing to 7 percent to 8 percent next year, Kolobov said.

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