Currently, the US dollar rate on the Ukrainian Interbank Currency Exchange has come to a delicate balance and has stabilized in the range of 20-21 UAH. This situation cannot be considered long-term predicted, even despite the fact that the price of the world currency has fallen significantly compared to previously observed values reaching 30 or more UAH / USD. Analysts build pessimistic forecasts for several reasons at once. At the moments of peak boom demand, no one particularly wondered why the dollar is growing in Ukraine. This seemed to be a natural result of the general instability in the country against the backdrop of the secession of Crimea, the escalation of military confrontation in the East and the panic expectations associated with these circumstances. Today, in a few months, there is an opportunity to analyze the causes of the fall of the hryvnia and evaluate its prospects.
Instrument - Currency Interventions
In order to understand what the growth of the dollar in Ukraine is connected with, one should understand the general reasons for this phenomenon without reference to a specific country. Economic laws work roughly the same in every corner of the planet. Exchange rates fluctuate in Africa, and in Asia, and in America, and even in faraway Australia, their trends carefully analyze stock brokers, making an assessment and predicting further growth or decline in ghostly digrams. Of course, each specific market has its own specific factors, but, in general, the price of a monetary unit depends on several determining factors. The most powerful regulator is the intervention of the Central Bank of the country. This means that in the event of an undesirable fall (Indian rupee, for example), the central bank of India begins to sell the dollar, thereby knocking down the price of it. Where does he get foreign currency is a secondary question. The Central Bank can extract it from foreign exchange reserves or borrow from another state.
Debts
There is another important question, by answering which you can understand why the dollar is growing in Ukraine. Today, the state’s domestic debt has exceeded one and a half trillion hryvnias. This amount is quite commensurate with the size of the gross national product, that is, the value of all material assets produced in the country for the year. The amount is catastrophic, but not comprehensive. There is also external debt, the size of which is measured in billions of dollars, and in a double-digit figure. The government is negotiating a restructuring, understanding it, obviously, as a deferral of payments with the prospect of complete forgiveness, but despite the promises of promise, things are still tight. Meanwhile, the dollar is slowly but surely growing. “Ukraine, why have you suffered the criminal regime of Yanukovych for so long?” - patriotic citizens ask. The following is a historical excursion.
As it was before
It cannot be said that during the reign of President V.F. Yanukovych, things in the economy were very good. According to Gontareva, newly appointed Minister of Finance, three years was enough for the "criminal regime swept away by the Revolution of Dignity" in order to spend 23 billion people's dollars on an empty matter of maintaining the exchange rate within 8.10 UAH / $.
This is true. Moreover, Gontareva’s data still flatters the Azarov’s government: they also need to add the amount of foreign debt growth ($ 2.4 billion). But everything is relative. About how fast the growth rate of foreign exchange interventions is now, can be judged by the dynamics of the decline in gold and foreign exchange reserves.
Reserve
The gold and currency reserves of Ukraine, as of the beginning of 2015, amounted to $ 7.5 billion. There have never been less in the history of an independent state, except in February 2004. Gold reserves are needed by any country to ensure its own economic independence. A special need for it arises in particularly difficult periods, one of which is observed right now. However, in difficult times, reserves are usually spent very carefully. Their decrease by 8 billion against the backdrop of an increase in debt of $ 2.6 billion did not answer the question of why the dollar is growing in Ukraine, and quickly and by hundreds of percent. Indeed, enormous funds were spent on stabilizing the exchange rate, and the result was negative.
Naftogaz hole and hryvnia emission
The intricacies of the blue fuel acquisition scheme may discourage an ignorant person. In fact, the exchange of shares of this intermediary company for government bonds (OVDPs), which seems to have been invented so as not to spend precious foreign currency, comes down, ultimately, to their repayment for all the same dollars. Where do they come from? Yes, all from the same rapidly melting gold and foreign exchange reserve. You need to pay for gas, but suppliers (both Russian and European) for some reason do not want to take bonds. Since Naftogaz spends more than it earns, the growing financial hole has to be covered with the same securities, and hryvnias are being used to redeem them, which are printing at a faster pace. The shock work of the State Sign, which resulted in uncontrolled emissions, is one of the reasons why the dollar is growing in Ukraine today, albeit secretly. The limit to this phenomenon is set only by the size of gold reserves, which is decreasing.
War
Whether there is a war today in eastern Ukraine is a complex and controversial issue. Judging by the number of human casualties and destruction, then it certainly takes place. Moreover, it is her current government who calls the main cause of economic distress. The northern neighbor (the so-called Russia) shows aggressive creeps - that is why the dollar is growing in Ukraine and other unpleasant things are happening. Indeed, a protracted military operation, bashfully called anti-terrorist and accompanied by a stupidly conducted partial mobilization, costs the budget unacceptably expensive. However, it is not the main cause of devaluation. The gap in economic cooperation with the CIS countries and, primarily, with the Russian Federation, has a much greater impact on this process. The result was a sharp decrease in the tax base. Industrial enterprises lost their supply channels, unemployment and the state budget deficit increased (the planned level of 3.7% of GDP, or UAH 63.7 billion in absolute terms, but it is unlikely to be kept within these limits).
Banking crisis
Paying population is the basis for the prosperity of the national economy. Almost instant devaluation put millions of customers of Ukrainian banks in a critical situation. Having taken foreign currency loans at the rate of 5 to 8 hryvnias per dollar, they faced a difficult choice between the loss of partially paid property and the need to pull the excessive strap of three-fold mandatory payments. Losses of banks also turned out to be considerable, the collateral value of acquired objects decreased, as did their liquidity. For customers, the secondary question was what is the reason for the growth of the dollar in Ukraine, they are often physically unable to fulfill the terms of the contract, which negatively affects the entire banking system, introducing it into stagnation.
Prospects
All hopes for the upcoming stabilization of the economic situation in Ukraine are placed by the country's leadership on effective reforms and foreign (western) loans, at least such exit routes are declared from high tribunes. During the heartfelt speeches, neither the President nor the Prime Minister talk about why the dollar is growing in Ukraine, nor about what the hryvnia can expect in the near future. One of the most important tools to curb the fall of the national currency was the artificial restriction of the sale of foreign currency to importers. Thus, the instant demand for the dollar is reduced, but in this case it just becomes deferred. As for the reforms, their goal for the majority of the population is not entirely clear. Most often, the upcoming prospective agreement on visa-free border crossing with the European Union is mentioned as an achievement. However, this issue has no relation to currency regulation. Without large-scale foreign assistance, the economy will not be able to get out of the systemic crisis, and no country is in a hurry to provide it. Under these conditions, the question of why the dollar is growing in Ukraine may soon lose its relevance.