Andriy Pyshnyy, Head of the Central Bank of Ukraine: “Ukraine depends on continued international financial support”

There are already 500 days of war. How much has the economy dropped since the start of the large-scale invasion of Russia?

Last year, GDP fell catastrophically by 29%. It was the deepest fall in the history of Ukraine. The good news is that at the beginning of the war it was less than many international organizations had anticipated. We expect the economy to remain stable this year. In April, we forecast 2% GDP growth for this year.

What repercussions did it have on the banking system? Do banks have liquidity today?

The Ukrainian banking system has proven to be resilient. Despite the war, the operation was not interrupted for a single day. Even the total power outage (October 22, 2022) did not prevent the operation from working. It also helped that he had adequate reserves and pre-existing protocols at the start of the war. Thus, until July 1, the liquidity (stock) of the banking system increased by 570,000 million hryvnia.

Still, they pressed billions of hryvnia to cover the budget deficit. Isn’t that dangerous?

Yes, the initial shock of the war created a crisis in tax payments and also created additional needs for defense finance and social subsidies. Also, we have limited monetary financing (through issuance of money) since July 2022 and never since the beginning of this year. We covered the budget deficit with revenues from the domestic debt market, taxes paid by Ukrainian businessmen and, of course, international aid.

It looks pretty optimistic. Do you ignore the risk of Ukraine going bankrupt?

No. It is true that Ukraine has a record budget deficit, but it is now closed. I am not describing the optimistic scenario, I am describing the scenario we have now. We fully understand the consequences of the war and the fiscal deficit resulting from the loss of a third of the economy.

Kiev reached an agreement to take a large loan from the International Monetary Fund (International Monetary Fund).IMF). Could this put the country’s economic dominance at risk?

My answer is no, the IMF will not jeopardize our independence and sovereignty. This is the other way. This support and cooperation only fuels our ability on the road to victory. Today Ukraine’s sovereignty is under attack by Russia, the Putin regime and Russian troops.

How long will the program with the IMF last?

The program provides four years of collaboration. Of course, Ukraine is interested in ensuring that the funds provided to us are in the form of grants as much as possible, because the Ukrainian economy is exhausted. Currently, the funding program is more than $115,000 million. This is the basic scenario. The negative scenario is $140,000 million. But our international partners have told us that they will support us no matter how long it takes. We are grateful. Ukraine today depends on this continued international financial support.

Which model is Ukraine evolving towards?

We are approaching the European Union. And I can assure you that we are determined to fulfill all the requirements of EU and NATO membership. And we recognize that the reforms Ukraine has to carry out are complex and ambitious, but they will be carried out. We are fighting against the past, because the future is in Europe.

In Ukraine there were several banks related to Russian citizens. What happens to these assets?

Often, these beneficiaries are sanctioned by the European Union, the United States or Ukraine. And now in Ukraine there is a functioning system, a procedure whereby if a person is sanctioned, their assets can be confiscated by the state based on a court decision. In addition, if these banks are deemed to be systemically important, the Central Bank initiates the expropriation process. In fact, the share of state banks in the Ukrainian banking sector is already quite high. It currently exceeds 60%. Therefore, if the bank goes through a process of nationalization or confiscation, the Central Bank is concerned with ensuring that the bank continues to operate stably and is sold out as soon as possible.

You have hearing problems, so you also have a different sensitivity. Are you worried about all the disabled and various disabled people left behind by the war?

Of course, I am worried as there are people with multiple disabilities in Ukraine. I lost my hearing 15 years ago. I understand what we will have to face. Disability of any kind will be real for years. Also, banking will have to adapt to many people with these disabilities because of the war. Personally, I will do my best to make the Ukrainian banking system and the entire environment for which I am responsible, inclusive and adapted to these people. We owe it to veterans and those who have suffered the most.