By James Marson And Alexander Kolyandr
Ukraine's central bank abruptly reversed a far-reaching ban on
foreign-currency purchases Thursday, one day after imposing the
measures in an attempt to halt the hryvnia currency's free
fall.
Prime Minister Arseniy Yatsenyuk had criticized the earlier
decision as bad for the country's already staggering economy. In a
decree published on its website, the National Bank of Ukraine said
it was canceling the three-day ban on banks purchasing foreign
currency for their clients and limiting the banks' purchases to
0.5% of their capital.
The rate fell back again Thursday after the central bank's
reversal. The national bank set its official rate at 30.01 hryvnia
a dollar from 28.05 Wednesday.
The country's economic woes are deepening as the currency
rapidly declines, in part because of delays on legislative measures
needed to unlock financing from the International Monetary
Fund.
The sharp drop in the currency, combined with punishingly high
interest rates, has ratcheted up pressure on Ukraine's banks,
economists say. Deposits have been bleeding out of the system in
recent months, but the national bank's restrictions on taking out
cash, as well as additional limits imposed by many banks themselves
and high deposit rates have kept the withdrawals from spiraling out
of control, industry officials say. The central bank has been
pumping money into the system to cover the outflow, since other
sources of finance are essentially cut off.
"Judging by the amount of the foreign debt Ukraine and its banks
need to cover until mid-March, there is no immediate risk of
default, while NBU support should help to avoid the collapse of the
core of the banking system," said Dmitri Polevoy, an economist at
Nomura Bank.
Local units of foreign banks account for about a third of the
system in Ukraine, with their international parents likely to carry
most of the burden for keeping them afloat, he said. But the rest
of the banking sector could prove too much for the national bank to
support, even with the expected IMF assistance, he said.
Meanwhile, a truce with Russia-backed separatists in the East
appeared to be taking hold, but nearly a year of fighting has
slashed income, drained government coffers and exacerbated a fight
with Moscow over gas payments.
Amid the economic turmoil, the Russian natural gas monopoly
Gazprom signaled it could ease up on a dispute over Kiev's gas
supply to the rebel-held regions, though it still threatened to cut
off gas delivery to Ukraine on the wider issue of payment.
The European Union invited the Russian and Ukrainian energy
ministers to a meeting Monday in Brussels to try to resolve the
situation.
Moscow has insisted it is Ukraine's responsibility to supply gas
to insurgent- controlled territories. Russian President Vladimir
Putin on Wednesday accused Ukraine of halting supplies, saying the
alleged action by Kiev "smells of genocide."
In a televised statement, Gazprom's spokesman Sergey Kupriyanov
said: "We are ready to exclude the question of gas supplies to the
(rebel-held) Donbas region from our discussion with Naftogaz," the
Ukrainian national gas company.
But Mr. Kupriyanov warned that Ukraine has only paid for enough
gas to last until the end of the week at the current level of
supply. Gazprom began requiring prepayment of gas delivery to
Ukraine last spring.
"If we do not receive new funds from Kiev, naturally, we will
not be able to continue supplying gas to Ukraine," he said.
"Therefore, the main question that Naftogaz has to address now is
to search for money to make a new prepayment."
Earlier this week Gazprom said supplies to the EU were at
"serious risk" after it said Ukraine had failed to make a payment
for new shipments.
The chief executive of Nagtofaz said Thursday that he couldn't
authorize paying Russia for March gas supplies because of a sharp
drop in the amount of gas delivered by OAO Gazprom since Feb.
22.
"There is no sense in paying for something we will not get,"
Andriy Kobolyev said in a telephone interview from Kiev.
He said Ukraine had the funds available to make the payment, but
wouldn't say how much money had been set aside.
European Commission Vice President for Energy Union Maros
Sefcovic has proposed that the issues of supplies and the cost of
gas for the rebel-held Donetsk and Luhansk territories be treated
independently from a wider gas supply agreement that guarantees gas
deliveries to Ukraine during this winter.
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