Ukraine is beginning to consider moving away from the US dollar, possibly linking its currency more closely with the euro, in the context of the fragmentation of the global trade and its growing links with the European Union, Andrii Pyshnyi, governor of the Central Bank of Ukraine, told Reuters.
The possible membership of Ukraine to the EU, the greatest role of Brussels as guarantor of kyiv’s defense capacities, the volatility of global markets and the probability of a fragmentation of trade force the central bank to wonder if the euro should be the reference currency of the Ukraine Hryvnia instead of the US dollar, he said in comments sent by email.
“This work is complex and requires quality and versatile preparation,” added the governor, in the most direct comments to date by a
Ukrainian manager on a possible change. Greenback dominates international trade and represents most world reserves, and economies such as Saudi Arabia and Hong Kong attach their currency to the dollar.
Commercial War
However, since his return to the White House in January, Donald Trump has caused a commercial war by announcing what could be the highest customs tasks of a century against his main partners, which led certain observers to question the future role of the dollar as a global reserve currency.
Ukraine, in the war with Russia since Moscow invaded its territory in February 2022, also saw Donald Trump temporarily interrupting part of the military aid that was vital for his armed forces since the previous presidency of Joe Biden.
European leaders, including those of the EU, promised to strengthen kyiv’s army to become the cornerstone of future security in Ukraine, but progress has been difficult.
Phoenix Kalen, analyst of the emerging markets of Société Générale, considers that the deliberations of Ukraine in their reference currency are part of a broader scheme of states that try to rethink the way to align their geopolitical, security and commercial links in a changing world order.
“In the case of Ukraine, its destination is certainly linked to Europe and European defense,” says the analyst. “From this point of view, all economic and political aspirations will remain closely linked to the euro, and I think it is logical, for many reasons, that they want to consider this change.”
Greenback has lost 9% of its value
Meanwhile, Ukraine and the United States have concluded an agreement that gives Washington preferential access to new transactions in Ukrainian minerals and finances investments in the reconstruction of the country.
Since the beginning of Donald Trump’s second mandate in the White House, Greenback has lost more than 9% compared to a reference currency basket, investors get rid of Americans incessantly, but for a long time he considered a shelter in times of crisis.
If some experts warn against the strength of the dollar strength with their state of reserve currency, dollars in dollars have historically been linked to safety alliances and military links with Washington.
American dollars continue to dominate all segments of the exchange market, underline the governor of the Ukrainian Central Bank, transactions called euros increased in most segments, although
“Until now moderately.” He did not give more details. The United States Treasury did not respond to a request for comments.
The ambition to join the EU
Ukraine presented Hryvnia in 1996 used the dollar as a reference currency for decades.
Immediately after the Russian invasion of 2022, the Central Bank of Ukraine imposed capital checks and established the Hryvnia at an official rate of approximately 29 by a US dollar. Subsequently, Kyiv was forced to devalue him due to the accumulation of budget imbalances.
In October 2023, the Central Bank went from a fixed parity regime to an administered key rate system that uses the US dollar as a reference, a stallion to measure interventions in the currency market and soft fluctuations in the key rate.
Ukraine and Moldova, which have ambitions of membership in the EU, began negotiations with Brussels almost a year ago, but the road is still long and full of difficulties before these countries can reach the block.
The president of the European Commission, Ursula von der Leyen, also said in February that Ukraine could join the EU by 2030 if he continued to reform his political and judicial system at the current rate and level.
Moldova replaced the dollar with the euro as a reference currency for the official exchange rate of Moldavian Lei on January 2.
A rapid end of war to increase growth
A resumption of investments and consumer activity thanks to the closest links with Europe and economic standardization would help Ukraine economic growth to recover slightly in the next two years to reach 3.7-3.9%, Andrii Pyshnyi defended, although the economic trajectory depends largely on the evolution of the conflict with Moscow.
“A rapid end of war would be clearly a positive scenario with good economic results if it included security guarantees for Ukraine,” he said.
“However, it is essential to recognize that the economic benefits of the end of war would probably take time to materialize.”
Ukraine has external funds to help them finance the war effort.
The governor said he hoped to receive $ 55 billion this year, which would not only cover the budget deficit, but also build a reserve of public finance in the coming years, when it is likely that the aid volumes decrease.
“We plan that Ukraine will receive around $ 17 billion in 2026 and $ 15 billion in 2027,” he said.
Source: BFM TV
