The NBU has lifted restrictions on setting the exchange rate at which banks buy and sell cash. The changes will take effect on May 21.

At the same time, the official exchange rate of the hryvnia remains unchanged: UAH 29.25 per dollar. At this level, the National Bank set the course in the first days of Russia’s invasion of Ukraine.

Restrictions on the exchange rate at which banks debit hryvnia funds from customers’ accounts if customers pay with hryvnia cards abroad have also been lifted.

This is against the background of the fact that the real exchange rate has already reached 37 hryvnia per dollar.

In parallel, the NBU has further restricted cash withdrawals abroad. What does this mean and why did it happen?

From April 14, the rate of sale and purchase of currency in banks could not deviate from the official by more than 10%. Prior to that, the free sale of cash currency was banned.

At the same time, financial companies that own currency exchange offices could set a free exchange rate.

This distorted the market and put banks on an unequal footing with other participants in the foreign exchange market, according to the NBU.

They also expect that the lifting of restrictions will correct the situation and even reduce the excitement in the foreign exchange market.

Over the last week, the dollar’s exchange rate against the hryvnia rose sharply: if on May 13 the cash dollar was in the range of UAH 34.2-34.5, then by May 19 the dollar rose to UAH 36.5-37.5.

However, only exchangers could trade dollars at this rate, while banks were forced to comply with restrictions. As a result, they lost to financial companies, and the choice for those who wanted to exchange hryvnia for currency was limited.

In addition, as there were few legal ways to exchange currency and demand was growing, “black” dealers returned to the market, which Ukrainians had already forgotten about.

“Removing restrictions on the exchange rates at which banks sell foreign currency to the public will improve the working conditions of legal market participants. This will help increase competition, increase the liquidity of the legal segment and reduce illegal transactions,” said NBU Deputy Chairman Yuri Geletiy. the foreign exchange market is more stable and will help reduce the amplitude of exchange rate fluctuations in its cash segment. ”

At the same time, the National Bank decided to temporarily reduce the monthly limit on cash withdrawals abroad from hryvnia accounts opened with Ukrainian banks to UAH 50,000 equivalent.

Prior to that, this limit was twice as high.

“This will reduce the risks of unproductive capital outflows, reduce opportunities for speculation and circumvention of currency restrictions, and thus – to protect Ukraine’s international reserves,” the NBU explained.

But the limit on cash withdrawals from foreign currency accounts has not changed and continues to be equivalent to UAH 100,000 per day.

The changes also do not apply to the use of payment cards abroad for payments for goods and services – most of them can continue to be carried out without restrictions, according to the National Bank. And they assure that “citizens will continue to be able to meet all their urgent needs.”

However, the course for which these operations will be carried out, obviously, will be different.

Today, millions of Ukrainians who fled the war use their hryvnia cards abroad.

It seems that, as in the case of fuel, the authorities are trying to curb the excitement and liberalize the market so that prices – in this case, the national and foreign currency – best meet the demand for supply in the market.

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