Euros instead of dollars: how the NBU plans to change its currency policy
8 May 10:26
National Bank of Ukraine Governor Andriy Pyshnyy has said that the country may move away from the dollar and try to tie its currency more closely to the euro amid “geopolitical rearrangements.” He said this in an interview with Reuters, "Komersant Ukrainian" reports
Ukraine may replace the dollar with the euro: the NBU gives reasons
The head of the National Bank of Ukraine has identified several factors that favor a closer peg of the hryvnia to the euro. These include Ukraine’s potential accession to the EU, the EU’s increasing role in ensuring Ukraine’s defense capabilities, greater volatility in global markets, and the likelihood of global trade fragmentation.
“This work is complicated and requires high-quality, comprehensive preparation,” Pyshny emphasized.
In addition, the head of the National Bank said that the revival of investment and consumer activity due to closer ties with Europe and economic normalization will help accelerate economic growth over the next two years to 3.7-3.9%.
However, he continued, everything will depend on the security situation in Ukraine.
“A quick end to the war would certainly be a positive scenario with good economic results if it included security guarantees for Ukraine. Nevertheless, it is important to recognize that the economic benefits of ending the war will likely take time to fully materialize,” the official emphasized.
Mr. Pyshnyi also said that the NBU expects $55 billion in external financing this year, which will not only cover the budget deficit but will also be used to reserve public finances for the following years, when the amount of aid may decrease.
“We predict that in 2026 Ukraine will receive about $17 billion, and in 2027 – $15 billion,” the head of the National Bank said.
The dollar index is falling
The dollar dominates international trade and accounts for most of the world’s reserves. Leading economies, including Saudi Arabia and Hong Kong, have pegged their currencies to the dollar.
Reuters notes that this year, under President Donald Trump, the United States has unleashed a trade war, imposing perhaps the highest tariffs in a century, prompting some analysts to question the dollar’s future role as the world’s reserve currency.
Since Trump returned to the White House, the dollar index has fallen by more than 9% against a basket of major currencies as investors divest from U.S. assets.
Pyshnyi points out that transactions with US dollars continue to dominate all segments of the FX market. However, the NBU governor added, the share of euro-denominated transactions in most segments is growing, although “moderately so far.”
It should be noted that Ukraine introduced the hryvnia in 1996 and used the dollar as its base currency for decades.
After Russia’s full-scale invasion in February 2022, the central bank introduced capital controls and pegged the hryvnia to the official exchange rate.
In October 2023, the central bank switched from a hard peg to a managed exchange rate regime that uses the US dollar as a benchmark-a measure for measuring currency interventions and smoothing exchange rate fluctuations.
