IMF demands Hryvnia devaluation from NBU before new loan negotiations

IMF demands hryvnia devaluation from NBU – BloombergThe International Monetary Fund demands that the National Bank of Ukraine devalue the hryvnia before negotiations on a new loan for Ukraine. This is reported by Bloomberg with reference to sources, reports UNN.

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The International Monetary Fund is pressuring the National Bank of Ukraine to devalue the war-torn country’s currency, a proposal that risks creating tension in Kyiv ahead of crucial negotiations on a new loan package.

According to sources, the IMF emphasizes the benefits of a controlled devaluation of the hryvnia as a step that could help strengthen Ukraine’s strained finances by increasing budget revenues denominated in local currency.

But officials at the National Bank of Ukraine are resisting such a move, citing risks to inflation and public sentiment.

Differences in economic policy pose a potential threat as Ukraine seeks a new loan package from the Washington-based lender, given that the war with Russia is now in its fourth year.

In negotiations with the IMF, the currency issue adds tension. Devaluation can lead to an increase in nominal budget revenues, as export contracts are denominated in foreign currency.

According to sources, NBU representatives are reluctant to succumb to IMF pressure, citing potential harm to the economy. The projected benefits are limited, as Ukraine’s budget largely depends on direct international aid, they said, while devaluation could also trigger inflation that could wipe out the fiscal cushion. In addition, there will be political consequences.

Ukrainian leaders have long been wary of devaluation, and the public is sensitive to price fluctuations caused by financial crises that preceded the war with Russia. According to a source, with no end to the war in sight and fatigue growing, political leaders will be reluctant to agree to such a move.

RecallThe US supports a new IMF lending program for Ukraine and the European Union’s initiative to provide Ukraine with a loan based on Russian central bank assets blocked in the West.