Arbuzov: 2014 was supposed to be a year of growth and stability in the foreign exchange market

Now we may only speculate what 2014 would be like if it was not for the violent change of power and the subsequent events in Crimea and the Donbass. Yet there are objective factors, which the previous government took into account drawing the budget for 2014 and making a forecast for development of the economy.

Former Governor of the NBU and First Vice Premier Serhiy Arbuzov told in an article for Forbes magazine about the former regime’s plans for maintaining the currency exchange stability and provision of the economic growth.

«First of all, the government expected to see an increase in export earnings, which would be encouraged by the law on transfer pricing, developed by the Ministry of Revenue and Duties in cooperation with PriceWaterhouseCooper’s, the growth in exports due to a significant reduction in gas prices for industrial consumers, increased cooperation with enterprises in Russia and CIS countries, as well as the growth of mutual trade. Cheaper gas, growth of household income, improvement of business climate, mentioned in the Doing Business rating after the change of the regime, gave reasons to count on termination of stagnation, production growth and GDP growth in 2014,» said Arbuzov.

He says the government also expected to reduce the burden on the budget and FX reserves due to reduction of payments for external debts, primarily payments on the IMF loan, since most of the debt was paid off in 2013.

«All that gave reasons to expect the surplus of currency in the market in 2014, which would relieve most tensions during the election year, facilitating the NBU’s task to maintain stability of the exchange rate. In case the government decided to use the rest of the Russian loan (US $15 bn) the FX reserves could grow to US $32 — 33 bn at year-end,» he said.

As to the further development of the situation, the former First Vice Premier is convinced it would depend on Ukraine’s relations with the EU and Russia, as well as the willingness of the new president to make reforms more profound.

«But in any case, there is every reason to believe that in 2015 Ukraine would look much more attractive than it looks now,» wrote Arbuzov.