Ukraine may abandon dollar peg in favour of euro, Reuters says

The National Bank of Ukraine (NBU) is exploring the possibility of shifting away from the US dollar and pegging the hryvnia to the euro.

Source: Reuters

Details: Andrii Pyshnyi, Governor of the National Bank of Ukraine, told Reuters that the reasons for this include closer cooperation with the European Union, instability in global markets, and a potential fragmentation of global trade.

He added that "this work is complex and requires high-quality, versatile preparation".

Currently, the dollar is still the main currency used in the NBU’s foreign exchange interventions. However, there has been a moderate increase in the share of euro-denominated operations in most market segments.

Following Russia’s full-scale invasion of Ukraine in 2022, the NBU fixed the exchange rate at around UAH 29 to the US dollar. In October 2023 it moved to a managed exchange-rate regime based on the dollar.

Ukraine expects to join the European Union by 2030. Similarly, Moldova switched to the euro as its reference currency this year.

The NBU forecasts that thanks to closer links with Europe and gradual recovery, Ukraine’s economy will grow by 3.7-3.9% over the next two years. However, further prospects depend on the course of the war.

"A quick end to the war would clearly be a positive scenario with good economic outcomes if it were to incorporate security guarantees for Ukraine," Pyshnyi noted. Meanwhile, he emphasised that the positive effects "would likely take time to fully materialise".

This year, Ukraine expects to receive US$55 billion in external aid. Pyshnyi said that US$17 billion is expected in 2026 and US$15 billion in 2027.

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