Ukraine's central bank eyes largest easing of wartime capital controls to date

Ukraine's central bank is finalising its largest package of measures to soften wartime currency controls to support local businesses and attract new investments, central bank officials said. When Russia invaded in February 2022, Ukraine's central bank imposed strict restrictions on capital outflows and tightened foreign exchange controls to maintain financial stability.

Ukraine's central bank is finalising its largest package of measures to soften wartime currency controls to support local businesses and attract new investments, central bank officials said.

When Russia invaded in February 2022, Ukraine's central bank imposed strict restrictions on capital outflows and tightened foreign exchange controls to maintain financial stability. The Ukrainian economy shrank by about a third in the first year of the war. As businesses have adapted, there have been growing calls for controls to be loosened. Buoyed by billions in financial aid from Ukraine's Western partners, the economy posted 5.3% growth last year and is forecast to expand by 3% this year.

"It will be the largest package on liberalization since the start of the invasion," the central bank's communications department said. The steps would involve granting permission to partially pay new dividends to non-residents, allowing payments for services imports and servicing interest on old debts.

A decision is expected soon, officials at the central bank said. But they provided no exact date, saying final details were "calibrated" and would be discussed with the International Monetary Fund, a key multilateral lender to Ukraine. The central bank started easing restrictions last year. One of its first steps was to bring a more flexible exchange rate, relaxing the official peg for the hryvnia currency.

The central bank also published a road map for further easing when the war and the economic situation allowed. Restrictions businesses currently face include limited access to purchases of foreign currencies and limits on conducting some operational payments.

Central Bank Governor Andriy Pyshnyi has previously said the central bank is ready to finalise its first stage of liberalization now that vital foreign aid for this year has been secured. Central bank reserves stood at a record high of $43.76 billion as of April 1.

The central bank estimates the costs of the new liberalization measures at about $5.5 billion. One of the most in-demand steps is the ability to pay for imports of services as marketing, advertising, and business consulting as Ukrainian businesses try to open new markets and unlock growth opportunities to offset their wartime losses at home.

Currently only payments for 'critical services imports' are allowed. The central bank has estimated that services imports could amount to about $100 million a month.

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