IMPACT OF WARTIME FACTORS ON UKRAINE'S EXCHANGE RATE POLICY
DOI:
https://doi.org/10.15407/economyukr.2025.12.020Keywords:
Ukraine’s balance of payments; devaluation of the national currency; foreign exchange interventions; currency regulation; international financial assistanceAbstract
Changes in exchange rate policy over three years of full-scale war in Ukraine and the influencing factors are analyzed. The transformation of Ukraine's exchange rate policy under martial law and its impact on economic development are studied. In the research process, the abstract-logical method and the generalization method were used, analytical and statistical data were systematized, which, combined with the scientific understanding of the results obtained, allowed for a comprehensive assessment of changes in exchange rate policy and the influencing factors. The legislative changes that shaped Ukraine's exchange rate policy in 2022–2024 are retrospectively considered. The impact of the structure of Ukraine's foreign trade on the development of market mechanisms for forming Ukraine's balance of payments is studied. It is shown that the loss of industrial potential due to the massive destruction of energy and industrial infrastructure deepens the raw material orientation of the economy and the country’s technological import dependence. It is concluded that due to the pass-through effect, a significant increase in imports leads to excessive foreign exchange demand and unwinding of a devaluation-inflation spiral.
The results of research into the financial account of Ukraine’s balance of payments indicate an invigoration of the trend toward capital outflow from Ukrainian economy, which is a consequence of easing the restrictions on its movement imposed by the National Bank of Ukraine at the beginning of the large-scale invasion. Significant war risks restrain the inflow of foreign investment, which deepens the problem of boosting the investment development of the economy.
It is proven that flexible exchange rate formation exerts excessive pressure on the gold and foreign exchange reserves of Ukraine, the capacities of which are limited. The paper substantiates the conclusion about a lack of objective reasons for return to the practice of a floating exchange rate in the near future, therefore, it is advisable to focus on ensuring exchange rate predictability, which will enable businesses to build a clear internal development strategy, reduce inflation expectations and lay the foundation for boosting the investment activity.
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