KIEV, March 31 (Reuters) - Ukraine’s central bank, expecting the first tranche of an international loan in April, has softened regulation of its foreign currency market imposed last month to inhibit currency devaluation and capital outflow.
“Today the National Bank has optimised the measures in order to ensure balance on the market,” the central bank said in a statement on Monday.
Ukrainian banks will be allowed to resume forward and swap FX deals. From April 1, they will also be allowed to buy foreign currencies for a client two days after the client deposits hryvnias in separate accounts, instead of three days.
In early February, the central bank banned banks from buying foreign currency before the sixth day after hryvnias were deposited. The aim was to protect the currency during the months of anti-government protests, which caused the hryvnia to plummet to record lows against the dollar.
Since mid-March, the central bank has been gradually reducing this period. Now it says banks will no longer need to flag clients’ applications with the central bank.
The central bank also cancelled a ban on purchasing foreign currency for insurance-company reserves and for investment abroad.
Last week, a delegation from the International Monetary Fund and Ukraine announced a $14-18 billion bailout package. That needs to be approved by the IMF executive board in April.
Ukraine’s finance minister, Oleksander Shlapak, said Kiev expected a disbursement of $3 billion in the first tranche of the loan. The deal will also unlock further credits, for a total of $27 billion, intended to help the heavily indebted ex-Soviet republic stabilise its economy after years of mismanagement.
Conditions sought by the IMF include allowing the hryvnia to float more freely against the dollar. The currency has lost about 25 percent of its value against the dollar since the start of the year.
“As dollar supply is quite weak, the hryvnia will continue falling until the first IMF tranche is seen on the market”, a bank dealer said. (Reporting by Natalia Zinets; Editing by Larry King)