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Some experts predict that the dollar will cost 50 hryvnias by the end of this year. Meanwhile, the Cabinet of Ministers in the draft state budget-2023 forecasts the technical exchange rate at the level of 42.2 hryvnias per dollar. What is the situation in the country’s currency market today, what does it depend on, and what are your forecasts?
Under normal circumstances, the exchange rate is affected by the export situation. What is happening now is what I would call seasonal fluctuations. But first of all, now we have to focus on the situation at the frontlines. The current dollar rate is a rescue rate, not a market one. If there were no huge infusions into our economy from partner countries, then it would be significantly higher. It’s even scary to think how much it could be.
I believe that at least now, we have survived this exchange rate. The Ministry of Finance, the National Bank, and the government in general did everything they could do.
In the formation of the rate, a prominent place is now occupied by income from our partners. If earlier, we counted that we had a billion in proceeds from the sale of grain and metal, now we count the funds we receive, say, from donors.
In the current situation, we won’t be able to maintain the course for the next six months or a year without the key factor – support from partner countries. Do not believe if someone tells you about the development of the economy, or economic processes now.
There will be infusions. Lend-lease financing has been open since October 1. It will go not only with weapons, but with financial support too. How intensively and quickly it will be is another question. But we are talking about quite large sums of money.
Can we say that the situation in the economy will be more stable with the operation of lend-lease, so there is no need to panic about the dollar?
I think so. Conventionally speaking, if Russia destroyed hundreds of diesel locomotives in Ukraine or bombed motor transport companies, then the financing of these needs no longer falls on the budgets of the city, region, or state, since it can be provided from abroad. We are not talking about purely financial support for balancing the exchange rate, but the support of economic assets, infrastructure, which are in the first place.
In the conditions we’re in, the rate must fluctuate, because there is a war going on. One thing is if the Russians launched one or two experimental missiles, but when it reaches 4 thousand missiles – it’s a completely different matter. Each missile costs an average of 15 million dollars. So fluctuations are logical.
If the official dollar rate is 42 hryvnias, what will the real rate be like?
Of course, it will be higher. Still, based on the actual solvency of citizens, enterprises, and banks, the system is currently unable to withstand the exchange rate of 50 hryvnias. If the importer needs currency, will he buy it at 50 hryvnias per dollar? He will not be able to sell his goods at such a rate.
Today, the exchange rate of 50 hryvnias per dollar will not be taken by either importers or citizens. But it may well become real a little later, when the system begins to adapt.
During this year and 2023, the dollar rate will constantly increase. I won’t say that it is fast, but it will happen.
What will be the rate before the New Year?
It’s difficult to predict, but I think we can reach 45 hryvnias per dollar. This winter will be difficult. In the autumn-winter period, first of all, energy will play a role. If the Russians blow up some thermal station, the exchange rate will be completely different, definitely not 45 hryvnias to the dollar. This will have a very serious impact.
So we can’t avoid price increases, right?
Yes. If the toothpaste cost 80 hryvnias, then it will probably cost 90 hryvnias, and maybe even 100. Because, in addition to the cost of the paste, the price also includes costs for its transportation and other expenses. Especially the price increase will apply to the goods we import. And we now have twice as many imports as before.
Does this situation stimulate the state to support Ukrainian manufacturers?
We have two support programs for Ukrainian manufacturers. The first is tax reduction, the second is help with real money, subsidies. In modern conditions, the state is not capable of this. If you stimulate the allocation of funds from the budget, some other industry will not receive them. And since the situation is very complicated, it’s probably worth a little patience.
When the war ends, the funds will no longer go as aid from partners, but as investments. Before that, we really need to invest in our businesses. And after the end of the war, investors will come to Ukraine.
If the war in our country ended in December, and in January we adopted a new tax law, which is currently being elaborated, and suddenly everything stabilized – the investors would then become more active in a month or two.
For world capitalism, a war-torn country is a Klondike. This was the case in Germany in 1945-50, Japan also experienced this. But these countries have become extremely attractive to investors. It can affect the currency rate, and in this case, the value of the dollar would decrease.
According to the simplest calculations, up to 8 billion investments could come to Ukraine. We have Lviv gas, shale gas deposits in the town of Olesko and the Donetsk region. From 5 to 10 billion dollars can already be invested there. Ukraine is rich in resources, but 25% of all deposits are located where hostilities are currently ongoing.
Victoria Savitska
Translated by Vitalii Holich
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