Toward the end of 2024 year the Ukrainians have been buying the dollar extremely actively. The National Bank of Ukraine (NBU) had to use reserves, to cope with the demand. Why is this is a slightly abridged translation of an article of the
Ukrainian service BBC. The full original in Ukrainian language can be read here. In 2024 year Ukrainians bought 12 billion more currency than the sold. And this is 7.5 billion more than the year ear before. According to NBU data, only in December was bought by 1.3
bln dollars more than sold. Some more higher indicator was only in October. The National Bank sold the currency itself in December 2024 year increased to record 5.3
billion. And in total for the year the NBU sold 35 billion dollars, buying only 0.13 billion dollars. With this the rate of the hryvnia to
the dollar for a year
slipped by 10.6%, by 4 hryvnias for a dollar. Only in the last month of the year hryvnia decreased by 1%. What is the reason for these processes? December demand for foreign currency in the first first priority is caused by big expenditures of the budget, wrote the NBU in the
first new year macroeconomic review. These expenditures traditionally increase at the end of the year, because everyone is “tallying” balances and closing the estimates. In November a big demand for currency was saved because of the outflow of capital from the private sector, the NBU said. But the foundation of these
processes was inflation, which began to scroll in the second half of 2024 year and by the end of the year reached two-digit
numbers, accelerating in November to 11.2% compared with the previous year.
Data for December is not yet, but the NBU suggests that the rapid price increase continued and in December .the last month of the year. Because of “increased attention to inflationary processes”, and simply saying, the shock of the price rise, “inflationary expectations of citizens in December have substantially
deteriorated”, noted in the NBU. It is indicative, that the level of inflation and devaluation of the hryvnia to the dollar are very close. The main reason for the increase in prices is
the deficit of some food from bad harvest and the increase in prices for production, caused first by
the destroyed energy. Business is forced to spend more on energy and is in prices. All this together is starting the economy into bad processes. “In December the deterioration
of business sentiment and slowdown of economic activity in a number of sectors on the background of the difficult situation in the energy and
security sectors, deficit of staff and agricultural raw materials, the National Bank explained. Covering the demand for the account of imported products has become an additional reason for the growth of prices, as imports are more expensive with the decline of the exchange rate of the hryvnia. And this is already long time the volume of imports to Ukraine exceeds the volume of exports, And in the last months of
last year exports were also decreasing because of decreased sales of agrarian and metallurgical products. “Negative saldo trade balance and increased demand for cash currency in the
last month of the year created sensible structural deficit of currency”, the NBU stated.
With such circumstances from more bigger devaluation of the hryvnia is saved only international financial assistance, the volumes have grown under the end of the year. In December Ukraine received 9.4 billion
dollars from partners (total for the year – 41 billion).According to preliminary calculations, Ukraine entered the New Year with currency reserves of about 43 million dollars. This gave the
NBU the opportunity to increase sales of currency and to close demand for it. But with the entry into the presidency of the President-elect of the United States Donald Trump helping Ukraine and the inflow of currency may decrease,
andthencoveringdemandandsupportingthestabilityofthehryvniawill becomemore difficult.In parallel, toincreasethestabilityofthemarketandslowinflation,theNBUraisedthekeyrateto13.5%.TheNBUcountsthatthiswillreturnthepopulation’sinterestinsavingsinhryvnias:itdisappears,whentheinterestonbankdepositsbecomeslowerthaninflation.Ifresumeinterestinthehryvnia,decreaseanddemandforthecurrency.Buttheobserversemphasize:Withthefull-scalewar,whichhasalreadybeenalmostthreeyears,andthelevelsofinflation,andtherateofthenationalcurrencyarenowbetter,thanitcouldbeexpected.Temneverless,astheUkrainianinvestmentbankerandeconomicobserverSergeiFursa,”eventhefact,thattheUkrainiancurrencyforayeardevaluedastheRussianrubleforaweek,doesn’tstophystericalheadlinesabouthistoricalrecordsofthefallofthehryvnia”.
