Bloomberg: The IMF requires the Ukrainian authorities to devalue the hryvnia

The International Monetary Fund is putting pressure on the National Bank of Ukraine, demanding to devalue the national currency before negotiations on a loan, Bloomberg reports, citing sources.

According to the IMF, the controlled devaluation of the hryvnia will help improve the difficult financial situation of the country by increasing budget revenues denominated in local currency. However, according to the interlocutors, the National Bank objects to such a step because of the risks of inflation and public discontent.

Ukraine has received most of the US$ 15.6 billion under the IMF program agreed in 2023, and now the parties are negotiating a new loan, which could amount to $ 8 billion.

The devaluation may lead to an increase in budget revenues in nominal terms, since export contracts are denominated in foreign currency, Bloomberg reports. The regulator is in no hurry to yield to the pressure of the IMF because of the potential damage to the economy. Ukraine's budget is heavily dependent on direct international aid, and devaluation can push up inflation, which can destroy the fiscal cushion, the agency explains.

In the spring, the National Bank of Ukraine stopped counting the official hryvnia exchange rate against the ruble, the Belarusian ruble and a number of other currencies. In October 2023, the regulator abolished the fixed hryvnia exchange rate against the US dollar and switched to the managed exchange rate flexibility mode.

The head of the fund, Kristalina Georgieva, plans to visit Kiev to discuss a new loan package to support the Ukrainian economy.