IMF pushes for devaluation hryvnia. According to sources cited by Bloomberg, the IMF argues that the devaluation of the hryvnia could increase nominal budget revenues Ukraine.
Many export contracts are denominated in foreign currencies, which would translate into higher revenues in hryvnias. For Ukraine, whose economy relies largely on international aid, additional funds could provide significant support in the face of the protracted conflict with Russia.
However, representatives of the National Bank of Ukraine (NBU) remain skeptical about the IMF's proposals. They fear that devaluation could cause an increase in inflation, which would additionally burden Ukrainian society, which is already struggling with economic difficulties. Additionally, such a step could negatively affect public sentiment, which is particularly sensitive during war.
Since the beginning of Russia's full-scale invasion in February 2022, the NBU has introduced a series of stabilization measures, including suspending the floating exchange rate to prevent a sharp decline in the value of the hryvnia. Despite these actions, since 2022 the Ukrainian currency has lost approximately 13%. its value in relation to the US dollar. However, the IMF believes that current steps are insufficient.
The future of Ukraine – key talks
Tensions over currency policy appear at a crucial time for Ukraine. The country recently finished using most of the funds from the IMF package worth $15.6 billion, which was approved in 2023.
Talks are currently underway about the next aid package, which may amount to up to USD 8 billion. Negotiations began this week in Washington, and further lower-level talks are planned in November. The head of the IMF, Kristalina Georgieva, is also planning a visit to Kiev to support the negotiations.
Ukraine faces a serious financial challenge as it looks for ways to plug the budget gap, which may amount to as much as $18 billion next year. Finance Minister Serhiy Marchenko estimated that the budget deficit in 2026 will be over 18%. GDP. Cooperation with the IMF is therefore crucial for the economic stabilization of the country, which has been struggling with Russian aggression for four years.
Devaluation of the hryvnia – political and social risk
The proposal to devalue the hryvnia has not only economic but also political consequences. Ukrainian society, which has experienced numerous financial crises in the past, is particularly sensitive to changes in the exchange rate and the resulting price increases. Given war fatigue, the government in Kiev may not be willing to make a decision that could cause public dissatisfaction.
Both the IMF and the NBU refused to comment on this matter. The Central Bank of Ukraine is currently in a period of silence before the announcement of its interest rate decision, which is scheduled for next week.
