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Yesterday’s move by Ukraine’s central bank to impose temporary capital control laws banning the purchasing of foreign currency as a result of the nation’s rapidly depreciating sovereign tender, the hryvnia, has been met with a response from the International Monetary Fund (IMF) which declared that it is ready to assist Ukraine with its foreign currency issues.
“IMF staff are in close contact with the National Bank of Ukraine and stand ready to assist in designing measures that will address excessive and temporary imbalances in the supply and demand for foreign exchange,” an IMF spokeswoman said in a statement which was reported by Reuters.
Whilst Ukraine’s capital control ruling which prohibited the purchasing of foreign currency by banks was initially set to last three days, the country’s central bank subsequently reversed the ruling yesterday evening, thus the ban on almost all FX trading lasted less than a day.
The country’s government economists viewed the ban as a method of potentially mitigating even further depreciation of the hryvnia, which has plummeted in value so dramatically recently. In 2014 it depreciated to half its value during the course of the entire year, a freefall which gained momentum as 2015 began, having halved again in value in just one and a half months. Now Ukraine awaits the first disbursement under a $17.5 billion IMF bailout.
According to Reuters, the IMF also said it was still waiting for Ukraine to complete prior actions before it could bring the loan program for approval to its board. But it emphasized that the funds would be “heavily front-loaded” once the program approval goes through, and Ukraine is set to get a “significant” chunk of cash right from the beginning. “We are convinced that this will help achieve rapid macroeconomic stabilization,” the IMF said in the statement.
War in Ukraine’s east has made it difficult to stabilise an economy on the verge of bankruptcy, and in a nation in which many people live on just $50 per month, with no access to sanitized water or basic services. The hryvnia has already lost more than half its value so far this year after halving during all of 2014.