Ukraine Central Bank Puts New Restrictions on Foreign Exchange Transactions
The National Bank of Ukraine's (NBU's) Resolution No. 49 took effect last Friday, placing a number of new restrictions on foreign exchange transactions that could greatly limit the ability of companies with customers in Ukraine to get paid.
Specifically, Resolution No. 49 enacts a temporary ban on purchases of foreign currency for the purpose of early repayment, by Ukrainian residents, of credits and loans in foreign currency under agreements with non-residents. Payments on such transactions must be made from the payer's own foreign currency funds as long as the Resolution remains in effect, which it will until the NBU decides to change course. The Resolution also bans insurance companies from buying foreign currency to cover their reserves.
Furthermore banks are obliged for fulfill orders of clients (legal entities and individual entrepreneurs) contained in the payment document in any currency only to the extent of the funds on the client's current accounts as of the beginning of the transaction day, meaning essentially that overdraft payments are unavailable. Banks are also limited, with some exceptions for education and medical transactions, to buying foreign currency not exceeding the value of 50,000 hryvnias per month, per individual, on the order of residents and non-residents for the purpose of transferring that money abroad.
In short, this means that individuals can only send 50,000 hryvnias, or about 5,700 USD, to a non-resident every month. Banks must place funds to be used for foreign currency purchases in a separate account from which these funds may be transferred for purchasing foreign currency after a six-business-day wait, essentially placing a hold on any foreign entity trying to get paid by a Ukrainian company when payment requires foreign currency beyond what exists in the company's current account.
Ukraine remains in the throes of both political and debt crises, and the latest limits on foreign exchange transactions are intended to boost the hryvnia, but could also negatively affect trade and create a black market for foreign currency.
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- Jacob Barron, CICP, NACM staff writer