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Capital control laws appear to be increasing in popularity recently, with Argentina having imposed draconian measures to ban free movement of its peso under the current administration led by Cristina Kirchner after no less than 30 attempts to curtail the use of US dollars in the nation.
Now it is time for another nation with a rapidly depreciating currency to follow suit, as Ukraine’s central bank has today outlawed the purchasing of foreign currency by banks for their clients until the end of the week and Russian President Vladimir Putin warned Moscow may halt natural gas supplies.
According to a report today by the Wall Street Journal, previous capital control measures which Ukrainian authorities have trialed over recent weeks have failed to stem the plunge of the hryvnia, which has lost about half its value against the U.S. dollar this year as the separatist conflict in the country’s east has drained finances, battered investor confidence and slashed output.
Prime Minister Arseniy Yatsenyuk called for an emergency session of parliament to pass economic and financial measures designed to secure much-needed financing from the International Monetary Fund.
The report by the Wall Street Journal continues to detail that Mr. Yatsenyuk slammed the central bank for making the decision “without any consultation,” saying that he’d found out about the measure from the Internet. “It clearly doesn’t add to the stability of the national currency that the National Bank is responsible for,” he said.
Turmoil in the European markets has been at very high levels this year so far, as other nations at the opposite end of the wealth spectrum have also considered capital control laws, albeit for other reasons. Denmark’s central bank considered imposing capital control laws on its sovereign Krone in order to stave off investment in the nation’s currency as a safe haven as the Euro continues to depreciate. These plans were rejected this week, however a turbulent financial ecosystem is clearly present.