This Thursday, the Verkhovna Rada (the parliament of Ukraine) is expected to consider a historic proposal to replace 25-year-old foreign exchange legislation with an entirely new law that will open our country to international investors and make it easier for Ukrainian businesses to operate globally.
Technical though it may seem, liberalization of our arcane foreign exchange controls will make Ukraine a much more investor-friendly place and will help the country take its rightful spot amongst the major European and global economies.
For nearly four years now, we at the National Bank of Ukraine (NBU) have been working to stabilize the macroeconomic situation and create a solid foundation for economic growth in Ukraine and prosperity for all who live and work here.
We have come a long way during that time. My new post-revolutionary team took over the National Bank in 2014, finding ourselves in an incredibly difficult context. Ukraine was not only experiencing military aggression from Russia in the East, but the profound economic turmoil that coincided with it — since, our team at the National Bank have worked tirelessly to stabilize the situation and tame inflation.
Today, the banking system is in better shape than it ever has been in the history of independent Ukraine thanks to the clean-up and reforms implemented since 2014. All of the obligations that the National Bank took on under the last IMF (International Monetary Fund) memorandum have been fulfilled.
External markets are also favorable for Ukraine as economies of our trade partners are recovering and commodity prices are high.
We must maintain this momentum, make life better for businesses and support investment. The time has come for large-scale foreign exchange liberalization. The proposed law moves us toward that goal.
To say it is overdue would be an understatement. The key legislation setting out our current currency control rules is a full 25 years old and it has not aged well. In the 1990s when Ukraine was struggling to tackle the Soviet legacy, set its economy on market rails and control capital outflows, highly restrictive rules on foreign currency transactions made sense. Today they are out of place and are holding back growth.
Out of Ukraine’s patchwork of foreign exchange laws, about 70 percent of the rules are about prohibiting or restricting things. This means administrative burden, delays and complications for Ukrainian businesses trading with overseas partners, foreign investors repatriating their investment or dividends, for Ukrainian freelancers doing work for overseas clients and many others.