: International Banker: Ukraine's banking system shows consistent signs of improvement

15:11 Jul. 27, 2016

International Banker: Ukraine's banking system shows consistent signs of improvement

Currency exchange Kiev, Ukraine, on 5th October 2015. On Independence Square you can see a large number of entertainment. (Getty Images)

John Manning, Harvard Law School Professor, claims both IMF financial assistance and imposition of capital controls helped Ukraine's central bank to steady hryvnia

After a heavy recession brought on by the military conflict with Russia, Ukraine's economy and banking system now appear to be firmly on the mend. Indeed, things have improved to such an extent that by the end of May, Moody's had revised its outlook for Ukrainian banking from negative to stable.

Read also Bloomberg: Ukraine's Gontareva pledges rate cuts, sees 2016 credit revival

The ratings agency has attributed much of the improved outlook to a growth in confidence in the country's currency on the back of significantly improved inflation expectations, which in turn is expected to boost the solvency of its lenders.

It has been a remarkable achievement, given that only just over a year ago inflation was recorded at more than 60 percent; today it is in the single digits. Much of the stabilisation has been thanks to the Ukraine central bank's decision to float its currency, the hryvnia, early last year.

Efforts to prop up the hryvnia had resulted in the bank's foreign currency and gold reserves hitting a 10-year low of less than billion—not even enough to cover five weeks of imports.

Read also Ukraine surpasses its pre-recession peak – World Bank Group

With financial assistance from the IMF (International Monetary Fund) following the floatation, as well as the imposition of capital controls, the central bank was able to steady the hryvnia and has since even managed to purchase dollars to replenish its reserves.

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