Ukraine Tightens Capital Controls as Hryvnia Drop Fuels Risk
by Krystof ChamonikolasDaryna Krasnolutska
5:59 AM EST February 23, 2015
Ukrainian troops queue to withdraw hryvnia cash from an automated teller machine in Artemivsk, Ukraine, on Feb. 20, 2015. Photographer: Vincent Mundy/Bloomberg
(Bloomberg) -- Ukraine’s central bank tightened limits on capital movement to counter a hryvnia selloff that’s straining the country’s finances before debt restructuring talks.
The National Bank of Ukraine will curb importers’ purchases of foreign currencies and has banned banks from lending to clients seeking to sell the hryvnia in the market, Governor Valeriya Gontareva told reporters in Kiev on Monday. More tools are available if needed to limit outflows, she said.
Ukraine is grappling with a 10-month pro-Russian insurgency that has deepened the economic recession and forced the nation to seek International Monetary Fund bailout loans to stay afloat. The currency’s 44 percent slump this year is adding to the financial distress by driving up the cost of imports including oil and natural gas and boosting the foreign-debt burden as the government seeks a deal with bondholders by June.
“The hryvnia at this level is bad pretty much from every angle, driving up local energy prices and making external debt less sustainable,” Fyodor Bagnenko, a fixed-income trader at Dragon Capital in Kiev, said by phone on Monday. “War-related fears and delays in the IMF program are prompting companies to hoard hard currencies, while the central bank’s ability to break the spiral is limited by critically low foreign reserves.”
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http://www.bloomberg.com/news/articles/2015-02-23/ukraine-bonds-fall-for-7th-day-to-record-after-kharkiv-bombing