Which mechanism of exchange rate formation will stabilize Hryvnia?

   In the beginning of February this year it was 2nd anniversary since the concept of a floating mechanism of exchange rate formation appeared in the Ukrainian business language. Without a doubt, this mechanism is correct and optimal for stable economies. Yet, taking into account past experience, we can now evaluate the correctness of this decision of the National Bank of Ukraine and its effectiveness for development of the national economy, and also answer the question whether this step of the regulator helped Ukrainian business.

If we will take into consideration that the decision to “set free” Hryvnia was made before those landmark events, which changed the vector of political development of the country, changed the structure of economy, switching life of Ukrainians into military regime, then we can confidently affirm that economy of the country being in the military conflict with its northern neighbor and passing through one of the deepest economic crises may be called “stable by a long stretch of the imagination only.

Was it right that in this tough period the regulator did not make any attempts to change the previously made decision about floating exchange rate formation and did not make anything to strengthen Hryvnia and pull it out the nosedive? I take the liberty of affirming that it was not. I believe that in this situation it was erroneous decision. I think that in this period it would be more expedient to apply the mechanism of floating exchange rate formation within certain limits (for instance, from 26.00 to 28.00 UAH per 1 USD), which should be approved by the regulator for the period of 1 year with further reviewing. This option, which would be in effect till 2020, might be accepted by the IMF upon the availability of convincing argumentation from the Ukrainian side.

In my opinion:
Firstly, in the country, which is at war situation, with a clearly defined political and economic crisis, it is quite difficult to assume the availability of stable economy, development of which is regulated by market.

Secondly, influence of financial and industrial group and their powerful lobby in-built into the legislative branch of the Ukrainian government on development of the country, do not let to assume the possibility of regulating the economy by means of market mechanisms.

Thirdly, underdevelopment of a strata of stable small and medium-size business, which understands rules of the same in the weak national market and influences actively executive authorities by means of introduction and strengthening market mechanisms, does not envisage the availability of feedback between the government and non- oligarch business, when businessmen have the possibility to forecast market behavior, including the financial market. Business shall not check the exchange rate daily. It has a different task – development of own business and development of the Ukrainian economy to the level of a stable market economy.

Today the young civil society, which is under formation, understanding that the clumsy state machine is to able to initiate steps so needed for changes in the financial field, is obliged to form a single clear position, including the issues of the mechanism of exchange rate formation, and make it being heard by the influential people/institutions, whom formation of market mechanisms of economy development and our happy economic future among developed countries promised to use in Decree of the President of Ukraine “On the strategy of stable development “Ukraine-2020” approved in 12.01.2015 depend on.