Hryvnia set to withstand emerging crisis, Concorde Capital CEO Igor Mazepa says

Igor Mazepa, the founder and CEO of Concorde Capital investment company, discussed the hryvnia’s future amid the emerging global crisis.

Currencies are being hit with volatility amid the emerging global crisis, Mazepa said. This applies to not only the hryvnia, but also the Russian ruble, the Turkish lira, the British pound sterling and the euro. That the hryvnia has fallen more than 2.5% last week is, more likely than not, the result of the panic related to signals of an advancing global crisis, says Igor Mazepa.

In the mid- to long term, the hryvnia will be affected by the exit of nonresident investors from the assets of emerging markets, a trend that we are seeing even in European assets. Investors are redirecting their investments towards either gold or U.S. securities.

That means locally based investors, whose debt matures in 2020, won’t reinvest in new issues of securities that could be offered by Ukraine’s MinFin. More likely than not, they will take these repaid hryvnias, go to the forex market and buy U.S. dollars with them. That can lead to slight pressure on the national currency, comments Igor Mazepa.

However, the National Bank of Ukraine (NBU) has reserves to withstand this pressure on the hryvnia. Its international reserves at the start of March exceeded USD 26.6 bln and covered four months of imports, just as the generally accepted comfort level of reserves is three months of imports, or about USD 19-20 bln, comments Igor Mazepa.

This gives the NBU a cushion of USD 7 bln that it can painlessly offer the market. Economists set this standard – of reserves covering three months of imports – precisely for such unforeseen situations in which foreigners exit emerging markets, summarizes Igor Mazepa.