By Alexander Kolyandr And James Marson
Ukraine's central bank abruptly reversed a broad ban on
foreign-currency purchases Thursday, a day after imposing the
measures in an attempt to halt the hryvnia's free fall.
Prime Minister Arseniy Yatsenyuk had criticized the earlier
decision as bad for Ukraine's economy, which is staggering after
nearly a year of fighting with Russia-backed separatists in the
east of the country. Although a cease-fire signed Feb. 12 appeared
to be taking hold this week, government coffers in Kiev have been
drained, inflation has soared and a fight with Moscow over
natural-gas payments was exacerbated.
The National Bank of Ukraine said it was canceling the three-day
ban on banks purchasing foreign currency for their clients and a
rule that limited purchases by banks to 0.5% of their capital.
The exchange rate fell back Thursday after having recovered
slightly a day earlier. The official rate was set at 30.01 hryvnia
to $1, from 28.05 Wednesday.
The country's economic woes are deepening 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 central bank's restrictions on taking out cash, as well as
additional limits imposed by many banks themselves and high
interest rates on deposits 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 [National Bank of Ukraine] 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 central bank to
support, even with the expected IMF assistance, he said.
Amid the economic turmoil, the Russian natural-gas monopoly OAO
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, but was awaiting a response.
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 don't receive new funds from Kiev, naturally, we won't 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 Gazprom since Sunday.
"There is no sense in paying for something we won't 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.
Write to Alexander Kolyandr at Alexander.Kolyandr@wsj.com and
James Marson at james.marson@wsj.com
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