Financial sector news

Gold and foreign exchange reserves have grown to $46 billion, and the hryvnia remains stable thanks to a policy of managed exchange rate flexibility. This was reported in an author's column by Andriy Pyshnyy, head of the National Bank of Ukraine.

The National Bank has been maintaining stability in the currency market for two years under a regime of managed flexibility. The transition to this regime in 2023 was the first time in Ukraine's history that a change in currency policy took place not under the pressure of a crisis, but from a position of macro-financial strength. As Pyshny noted, the exchange rate did not “skyrocket,” and the country's international reserves even increased from $39 billion to $46 billion.

The head of the NBU explained that the fixed exchange rate, introduced at the beginning of the full-scale invasion, acted as a “turnstile” that stopped the panic and stabilized the economy. But over time, it had to be removed so as not to harm natural market processes. The managed flexibility regime allowed the economy to adapt to external and internal shocks, avoiding the accumulation of imbalances.

Two years after the introduction of the new regime, the share of foreign exchange transactions without the participation of the NBU has more than doubled to 50–60%, which indicates market development. At the same time, public demand for foreign currency remains subdued, and the difference between the official and cash exchange rates is minimal.

“We have created conditions where the hryvnia exchange rate can fluctuate in either direction depending on market factors,” Pyshnyy emphasized. “This reduces the economy’s vulnerability to shocks and increases confidence in the hryvnia.”

The NBU will continue to gradually increase exchange rate flexibility while maintaining control over inflation and exchange rate expectations. The regulator's main goal is to ensure price stability and confidence in the national currency by keeping inflation within the 5% target range.