NBU: The printed hryvnia puts pressure on the exchange rate

The Financial Stability Council of Ukraine discussed the negative consequences for macroeconomic stability from excessive funding to finance the state budget deficit, the press service of the National Bank reports.

On June 22, the central bank printed 190 billion hryvnia to finance the budget.

“Such consequences are most clearly expressed in the impact on the foreign exchange market. The hryvnias issued into circulation enter the foreign exchange market, which puts pressure on the exchange rate,” the message said.

The regulator recalls that during the war it spent large sums from reserves to meet the demand for foreign currency.

“Such a reduction in international reserves has not been reduced by international aid. If the NBU’s international reserves are depleted by funding budget emissions, it will create the threat of a significant devaluation of money and a rapid acceleration of inflation. For its part, it increases the risks to financial stability, “the central bank notes.

According to the NBU, for the five months of 2022, the state budget deficit will be much larger than in 2021 and 2020. Today, the government’s monthly financial needs are estimated at approximately $ 5 billion.

“Since the beginning of Russia’s large-scale aggression against Ukraine, government support from the National Bank has become dominant, but it cannot be an alternative to funding the budget deficit from other sources, such as lure of international and market financing, “the message said. .

As you know, after the start of the war, the official exchange rate against the dollar was fixed at 29.25 hryvnia.

And from May 21, the NBU allowed banks not to limit their rates for the sale of cash currency, and also removed restrictions on the rate at which banks write off hryvnia funds from cards for non-cash payments or withdraw funds from overseas cards.