The NBU Board approves the Strategy for easing currency restrictions

In fulfillment of its obligations to the IMF, the Board of the National Bank of Ukraine has approved a Strategy for easing currency restrictions, moving to greater exchange rate flexibility and returning to inflation targeting. The news was announced by the NBU.

"The development of the Strategy is one of the structural elements of the Extended Fund Facility program with the International Monetary Fund, which was to be completed by the end of June 2023. Therefore, the approval of the Strategy, which was previously approved by IMF experts, means that Ukraine has reached the next structural point," the NBU said.

The strategy has three main areas:

Easing currency restrictions.
Transition to a more flexible exchange rate.
Return to the principles of inflation targeting.

Each direction includes a general description of the sequence of stages, key priorities, principles, and prerequisites for implementing the Strategy.

It is emphasized that the steps in the implementation of the Strategy will not depend on specific dates, but on the availability of the necessary preconditions.

"For example, due to the relevant prerequisites, the NBU was already able to ease some currency restrictions in June. However, the preconditions for the next steps are still being formed," the NBU explained.

In the course of implementing the Strategy, the NBU will also take into account the results of the analysis of the effectiveness of previous steps and the potential impact of changes planned for one area on other areas and other aspects of macroeconomic policy, in particular on the fiscal position and public debt sustainability.

"This approach to returning to inflation targeting with a floating exchange rate ensures the implementation of an orderly, consistent process that will help minimize risks to price and financial stability and maximize the potential for sustainable economic recovery," the NBU said.

It is noted that the exchange rate stability will remain an important element in achieving the NBU's goals at all stages of the Strategy implementation.

"Therefore, the NBU will continue to maintain tight monetary conditions by keeping real interest rates sufficiently high. This will ensure the high attractiveness of hryvnia assets and help reduce risks to the stability of the exchange rate," the NBU said.

The public version of the Strategy will be published by the NBU on the NBU's official website by July 7, 2023.