|
 
Sergiy Lyovochkin: A policy of hryvnia artificial revaluation is inadmissible
A comment on the exchange rate policy of the National Bank of Ukraine
22.05.2008, 12:09
Given long-term principles of the economic policy, strengthening of the hryvnia exchange rate is a prearranged process. In 1996 the exchange rate was UAH 1.89 / US $1. Following the global financial crisis the hryvnia exchange rate has fallen by almost three times: in 2000 it equaled UAH 5.44 / US $1. Existent hryvnia depreciation is also evident from the purchasing power parity calculated by the IMF. According to the latest Fund data, in 2007 Ukraine's GDP in current prices amounted to US $140.5 billion, whilst the purchasing power parity was US $320.1 billion. The difference was approximately 2.27 times. It is significant that a similar gap in developed countries falls within 0.91 (France) – 1.46 (Great Britain). In the countries with transitional economy the deviations in point are the following: Bulgaria – 2.18, Czech Republic – 1.74, Estonia – 1.70, Russia – 1.62, China – 2.64.
One should take into account that hryvnia weakening deforms the macroeconomic proportions of the Ukrainian economy, boosts export, artificially tightens domestic market, diminishes technological incentives for export production and the most important – devalues the cost of labor, intensifies migration processes, depreciates financial assets of the market players, including cost indices of capital assets. As a result we will get the artificial understating of the whole system of cost parameters which determine Ukraine's position in the global economy, as well as its competitiveness.
At the same time the matter of reinforcing currency positions of hryvnia is extremely difficult. A policy of artificial (forced) revaluation will not do. A new economic state of affairs regarding Ukraine's joining the WTO should also be considered. Under conditions of an open global competition almost all countries throughout the world (now the USA as well) make efforts to protect the internal markets and promote external competitiveness of their own production, their export potential through devaluating the national currency. China's experience in this case is especially persuasive.
Relevant issues should be estimated in the light of another factors as well, such as lower import tax, liquidation of bill of exchange schemes for custom payments, higher energy carrier prices and transport fees and other points destructive for the competitiveness of domestic production and economic dynamics of the government. The Holy of Holies of the market economy is violated: protection of domestic producer's interests is the main function of the government.
Examining the issue of proper time for implementing hryvnia revaluation, one cannot but take into account dramatic growth of trade balance deficit: according to the NBU data, in the first quarter of the current year goods export grew by 28.9%, import – by 44.5%. The matter concerns as well artificial depreciation of credits provided by Ukraine's banks for entities. According to the NBU data, as of 01.05.08 the general sum (UAH 494.8 billion) comprise UAH 247.6 billion of credits in the national currency and almost the same amount, i.e. UAH 247.2 billion are in foreign currency. Out of UAH 309.1 billion of deposits attracted by banks, UAH 104.2 billion (33.7%), including natural persons' deposits which amount to UAH 72.7 billion (23.5%), are nominated in foreign currency. In this view one should also consider depreciation of the population's hoardings (non-bank savings) which are nominated in dollar equivalent and reach US $8-10 billion by various estimations.
In this state of affairs a policy of introducing currency liberalization mechanisms urged by the IMF experts seems to be more weighed. Meanwhile, our actions in this sphere should be also well-thought. Free floating rate (except just a few countries) is not used in a full scope. It has to be implemented stage-by-stage. On introducing a relevant system of currency policy, compensational (credit and fiscal) measures should be applied in order to decrease negative consequences of relative steps. Today it is high time for transition to a policy of inflation targeting and elaborating thereon a balanced (short- and long-term) anti-inflationary policy, which would systematically comprise financial, monetary and currency regulating mechanisms.
Sergiy Lyovochkin, People's Deputy of Ukraine,
Head of the NBU of the Opposition government | |
|
| 
| 
| 
