The EBA Ukraine and GB4U members had an opportunity to meet Yuriy Heletiy, Deputy Chairman of the National Bank of Ukraine. During the meeting, the findings of a special survey were presented, aimed at identifying the current needs for easing currency restrictions and assessing the effectiveness of measures taken by the National Bank of Ukraine in May 2024.
As a reminder, this year, the National Bank approved a comprehensive package of relaxations on temporary currency restrictions introduced due to martial law on February 24, 2022. These measures significantly simplified the operations of the Association’s member companies, though certain needs remain pressing.
The most urgent requests from businesses regarding potential easing of restrictions are:
The purchase of foreign currency to fulfill obligations regardless of the company’s available currency funds;
Increasing limits for operations using hryvnia corporate payment cards outside of Ukraine;
The completion of foreign exchange supervision by banks regarding residents’ compliance with deadlines for export/import transactions when obligations are offset through mutual settlements;
Payment of dividends to non-residents accrued before 2024;
Payment of loans to non-residents (those currently not allowed by the National Bank);
Payment for imported goods delivered before February 23, 2021.
During the meeting, Yuriy Heletiy emphasized that the National Bank is actively working towards easing currency restrictions. In particular, as early as May, the NBU began implementing the second phase of its currency liberalization roadmap. However, the National Bank cannot relax restrictions faster than the necessary conditions are created, as this could jeopardize the stability of the currency market. This stability is crucial not only for the state but also for businesses and the population.
The Deputy Chairman of the NBU also highlighted that a cautious approach to currency liberalization is necessary to preserve international reserves, which are essential for maintaining macroeconomic stability. The NBU strives to design liberalization measures in a way that benefits the largest number of economic entities. These steps will be taken once the necessary prerequisites, which the National Bank continues to work on, are in place, he concluded.
Purchase of foreign currency to fulfill obligations regardless of the company’s available currency funds
One of the most pressing needs for businesses, as noted by 79% of respondents. Of these, 25% estimate their monthly need at more than UAH 5 million, 13% – UAH 100-500 thousand, 10% – UAH 2-5 million, and 7% indicated limits ranging from UAH 500 thousand to UAH 1 million or UAH 1-2 million.
At the same time, companies are requesting an extension of the foreign currency payment deadline after purchase to 4-5 days, instead of the current 2 banking days (previously, payments were valid for up to 10 banking days). This restriction is very inconvenient for companies with multiple levels of signatories.
Increasing the limits for operations using hryvnia corporate payment cards outside of Ukraine
79% of companies (compared to 68% at the beginning of 2024) need an increase in the limits for transactions using hryvnia corporate payment cards abroad. Among them, for 57% (previously 44%), this issue is relevant but not critical, which can be explained by the abolition of the list of critical imports of services and other currency restriction relaxations adopted by the NBU in 2024. For most companies (35%), a monthly limit of UAH 100-500 thousand would suffice, a quarter would be satisfied with UAH 500 thousand – 1 million, and 6% of companies would be fine with a limit of up to UAH 100 thousand, while in February, this figure was 17%. This change in proportions is likely due to the devaluation of the national currency.
Completion of foreign exchange supervision of compliance by residents with deadlines for export/import operations in cases of termination of counter-obligations by netting
73% of respondents stated that this need is relevant (extremely relevant for 21%). Of those for whom this need is relevant, 26% consider a limit of up to EUR 500,000 per month to be satisfactory, 18% – more than EUR 2 million per month, 7% – EUR 1-2 million per month, and 10% – EUR 500,000-1 million.
Payment to non-residents of dividends accrued for the period up to 2024
In May 2024, the National Bank allowed the payment of dividends accrued for 2024 within the established limit of 1 million euros per month. However, 69% of the companies surveyed by the Association (compared to 71% in February) still consider the need to pay dividends to non-residents for the period before 2024 as relevant. At the same time, this point remains critically important for 29% (compared to 43%). Thus, the easing of foreign exchange restrictions regarding the payment of “new” dividends has not had a sufficient economic impact for companies. The decrease in the share of companies for which this issue is critically important reflects improved business sentiment.
Nearly half of the respondents indicate that the need to pay dividends to non-residents will be fully satisfied if rules are introduced to set the dividend payment limit in proportion to the enterprise’s profit, as well as to ensure equal conditions for dividend payments by companies of different organizational forms (including allowing joint-stock companies to pay dividends based on the results of 2023).
Additionally, 32% of respondents noted that the 1 million euro monthly limit is insufficient and requires an upward revision.
Payment of loans to non-residents (for those payments currently not allowed)
For 51% of the companies surveyed, the issue of loan payments, which are currently not permitted by the National Bank, remains relevant. Of these, 22% estimate this need to be more than 2 million euros per quarter (compared to 26% previously), 13% of companies (previously 24%) indicated a need of 100-500 thousand euros per quarter, and 6% (previously 26%) indicated less than 100 thousand euros.
Granting permission to repay “old” loan principal debt, borrowed from foreign banking institutions, would enable the attraction of new financing from foreign banks.
Payment for imported goods and services delivered before February 23, 2021
This issue is critically important for 25% (up from 13%) of respondents and relevant but not critical for 21% of surveyed companies (unchanged). The most requested payment limit is up to 500 thousand euros (11%), and from 1 to 2 million euros (10%).
For some companies, the removal of this restriction is a priority, as it would enable them to service loan obligations under credits guaranteed by ECAs (export credit agencies). This is particularly important for payments related to distributed generation projects, which are vital for reducing power outages and boosting economic activity.
Payment of fines for breach of export contract terms
For the majority of companies surveyed by the Association, operations related to the payment of fines for breaches of export contract terms are not relevant. They are relevant but not critical for 21% of companies and highly relevant for 3%. For most, a limit of up to 100,000 UAH per month would be sufficient.
Maximum deadlines for export/import transactions
38% of businesses consider a 360-day period sufficient, while 48% are satisfied with a 180-day period. Only 6% of respondents find a 90-day period acceptable. At the same time, businesses propose extending the deadline for the return of foreign currency due to the long production time for equipment (sometimes even exceeding 360 days). In cases of violations of the foreign exchange control deadlines for the import of goods, caused by martial law and the inability to deliver goods, it is proposed to cancel the accrual of penalties and fines for importers.
Funding of Foreign Representative Offices
For a small number of companies, the need to increase or lift the limit on funding activities of foreign representative offices remains relevant. Additionally, there is a need for permission to pay taxes abroad for companies that were forced to open foreign offices because many of their employees are working from abroad. Currently, there is a ban on purchasing foreign currency to pay fees to foreign tax authorities.
For reference:
The survey was conducted for the second time in July-August 2024 among member companies of the European Business Association. A total of 72 companies participated in the survey. The first wave of the survey to identify the current needs regarding the easing of currency restrictions was conducted in January-February 2024, and its results can be found on the EBA’s website.
It is important to note that the weighting of responses is the same for all companies, regardless of their size. Therefore, the real cumulative economic impact of the steps towards currency liberalization may be insignificant, while still addressing the needs of a large number of companies.
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