IMF recommends Ukraine to switch from dollar to euro

The International Monetary Fund recommends the National Bank of Ukraine to refuse fully from hryvnia's attachment to dollar and transfer to euro. Experts believe that currency changes may be performed even this year to hold price hike to 20%.

According to IMF Managing Director Dominique Strauss-Kahn, this may become a key instrument in combating inflation in Ukraine. Despite inflation is a global trend, he named the rise in prices of foodstuffs in Ukraine "unbelievable" due to huge social expenditures of the budget. "Such situation cannot last too long, as very long-term negative consequences will come later on," he noted.

Senior Fellow Anders Aslund, Peterson Institute for International Economics, says the inflation processes are linked with the Central Bank's activity which attached hryvnia's rate to dollar. According to his calculations, dollar became cheaper by 30% to euro for a year, while imported the same inflation index. This was "the worst case" in the world - annual inflation in the country exceeded 31%. "Ukraine has plenty of hot money. This is banking money for consumer loans. What are you doing? You offer loans under 30% inside the country financing them from abroad by 6%. These are speculative loans, he said. This money inside the country goes for real estate, purchase of import goods, that is, import is growing and a paying balance is worsening that leads to high prices, high exchange rate and large foreign debt". According to him, Ukraine is the only CIS country having national currency attachment to dollar.

Petro Poroshenko, Head of the National Bank Council states the NBU has not attached hryvnia to dollar as strictly as the experts say. According to him, the Council passed a decision on a bi-currency policy. "Hryvnia's rate will be fluctuating not only in ratio of hryvnia to dollar, but hryvnia to euro as well. We will also take into account dynamics of currencies of the states that are our largest partners. If there are flicks on ruble, pound, franc, the policy will be targeted on them," Poroshenko said.

Beginning from May 30, NBU daily corrects hryvnia's rate to dollar.