STRENGTHENING FOREIGN EXCHANGE REGULATION IN UKRAINE AMID THE ESCALATION OF HOSTILITIES

Abstract

The relevance of using the potential of foreign exchange regulation in Ukraine in time of war and post-war economic reconstruction is substantiated. Using the example of the National Bank of Ukraine’s foreign exchange regulation measures in wartime, the efficiency of foreign exchange restrictions for curbing panic and speculative interests, preventing domestic capital’s flight and general stabilization of national currency’s exchange rate has been confirmed. It is noted that the measures to stabilize the exchange rate could have been more efficacious if they had been implemented within the framework of efficient foreign exchange regulation system.

Based on Ukraine’s balance of payments data indicated sources of devaluation pressure in the forms of: trade credits going abroad, import of services, and withdrawal of cash currency from hryvnia card accounts. The signs of impairment in the balance of payments structure due to a decrease in income from product exports and remittances that are replaced by international financial aid are outlined.

The identified threats confirm the need to develop a domestic system of foreign exchange regulation and supervision to prevent the withdrawal of domestic capital, limit speculative and panic demand for foreign currency, and increase supply on the foreign exchange market. It is noted that the strengthening of measures to stabilize the national currency fully corresponds to the current views of scientists, the recommendations of international financial institutions and the requirements of European integration, especially considering the circumstances of the war.

The primary areas of development of the foreign exchange regulation system are conceptualized, including the official recognition of the need for such a system and expansion of the foreign exchange supervision system’s functionality, an emphasis on limiting speculative and panic demand, the fight against illicit ways of withdrawing capital abroad. An effective toolkit for such regulation should include a wide range of measures, including the use of macroprudential policy tools, control over capital flows and currency interventions on a long-term basis, prompt use of administrative requirements to secure identified ways of avoiding established restrictions.