KYIV (Reuters) – Ukraine’s central bank decided on Thursday to devalue the country’s currency by 25% against the U.S. dollar to cushion the economic impact of the war with Russia.
In a press release, the National Bank of Ukraine (NBU) explains that the new rate of the hryvnia is now fixed at 36.5686 for one dollar whereas it was at 29.25 previously, the rate in force since the beginning of the month. Russian invasion nearly five months ago.
The bank justifies this decision by the “change in the fundamental characteristics of the Ukrainian economy during the war and the strengthening of the American dollar against other currencies”.
“This measure will improve the competitiveness of Ukrainian producers, converge exchange rate conditions for different types of businesses and for households, and support the resilience of the economy during the war,” she writes.
According to the NBU, the devaluation of the local currency will also reduce the “speculative behavior of market players”.
This devaluation comes the day after Kyiv asked its international creditors to freeze interest payments on its debt for two years in order to concentrate its financial resources on the war effort.
Ukraine’s economy is expected to contract by around 35% to 45% this year, partly due to the war.
(Report Natalia Zinets and Aleksandar Vasovic; French version Claude Chendjou, edited by Sophie Louet)
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