In an attempt to expand the use of Ukrainian Hryvnia ("Hryvnia") in cross-border transactions, the National Bank of Ukraine (the "NBU") submitted to the parliament Draft Law No. 9488 "On Amendments to the Article 7 of the Decree of the Cabinet of Ministers of Ukraine "On the System of Currency Regulation and Currency Control", dated 22 November 2011 (the "Draft Law").
According to the Draft Law, Hryvnia could be used for payments in cross-border commercial transactions between residents and non-residents. Currently, cross-border transactions are mostly settled in foreign currency. Hryvnia is used only in cross-border transactions with "Ruble zone" countries (i.e. former USSR countries except for Estonia). The use of Hryvnia in cross-border transactions with other countries is currently restricted and requires an individual licence from the NBU. The Draft Law would eliminate this requirement thereby making Hryvnia more easily available as an additional payment currency in cross-border transactions with all countries.
As is the case now, cross-border payments will be settled through authorised banks. However, the detailed procedure for carrying out such payments will be prescribed by the NBU.
As indicated in the explanatory note to the Draft Law, this change has been prompted by the very limited use of Hryvnia in cross-border transactions (0.1% of all cross-border payments). In addition, the convertibility of national currencies is one of the main statutory requirements for members of the International Monetary Fund, which Ukraine joined in 1992.
The NBU believes that the Draft Law will reduce the burden currently put on the Ukrainian currency market. It will also help to eliminate the currency risks taken by Ukrainian exporters and importers in cross-border transactions and strengthen the position of Hryvnia in international markets.
Law: Draft Law No. 9488 "On Amendments to the Article 7 of the Decree of the Cabinet of Ministers of Ukraine "On the System of Currency Regulation and Currency Control", dated 22 November 2011.
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The original publication date for this article was 30/11/2011.