Revisions to Ukrainian currency control legislation offer potential to significantly improve business climate
While many people in Ukraine have recently been somewhat preoccupied by conjecture about which national logo would best sum up the country’s new identity, it is worth pausing for a moment to talk about more concrete developments that directly affect Ukraine’s future progress. Producing the right visual component for Ukraine’s national branding is certainly an important issue worthy of debate. However, current practicalities dictate that we give priority focus to the many complex tasks facing Ukraine as the country seeks to harmonise its legislation.
What can we see today? Large-scale reforms may not be terribly consistent or constructive, but they are being implemented nonetheless. For an indication of how the broader process is developing, it is instructive to look specifically at the changes occurring in Ukraine’s rapidly evolving banking sector. These changes are particularly noteworthy as they directly affect both domestic and international businesses.
Many of the most recent changes that have occurred and are still in process within the Ukrainian banking industry relate to currency legislation. As of last year, it has become possible to buy up to UAH 150,000 in foreign currency, when previously this limit was set at just UAH 12,000! In addition, all restrictions on the withdrawal of deposited funds have been lifted. We are now approaching the next major milestone. The Ukrainian parliament has adopted the draft law “On Currency”, developed by the National Bank of Ukraine (NBU), in its first reading. This law looks at changes in the procedure for issuing currency licenses, and, should the document go into effect, individuals may then transfer funds abroad without any restrictions.
This law is very much in demand by business and is intended to replace an archaic decree by the Cabinet of Ministers that dates all the way back to 1993 and the early years of Ukrainian independence. This initial decree stated that permission needed to be obtained from the NBU when buying or selling currencies if the hryvnia was not involved in the exchange. It should be noted briefly that there was no guarantee such permission would be obtained. The degree to which the Ukrainian business climate will benefit and be simplified by the abolition of this process needs little further explanation: instead of going through the numerous channels previously necessary to obtain permission, the law suggests the NBU simply be notified post-factum of the operation.
The Law “On Currency” also supposes the abolition of individual NBU licenses for investments made abroad within set limits. Again, this will significantly reduce the bureaucratic burden of collecting an extensive package of documents that would have had to have been submitted to obtain the license in the first place within the framework of the previous legislation. In addition, it will no longer be necessary to register loans from other countries with the NBU.
Important changes concern also the work of exporters and importers. According to the document, the maximum period for settlements on export and import operations may be set at more than 180 days, and sanctions of violations regarding foreign exchange regulations for players in the export-foreign exchange sector will be lessened. This does not mean a complete abolition of control – the NBU and other regulators will still have the right to inspect. However, this will take place in a much more loyal format. Various details and clarification of the new rules will be made public at the level of other legislative acts.
Even if confirmed, these currency legislation changes are unlikely to be the last. Although many currency restrictions having been lifted since 2015, further liberalisation of the Ukrainian currency regime is one of the conditions of Ukraine’s landmark Association Agreement with the EU. It was earlier promised that Ukraine would ensure the free flow of capital, and it would be a good thing to fulfill those obligations. You might call it a sign to our foreign partners that Ukraine is ready to build reliable and transparent relations based on European standards.