Ukraine is considering the possibility of switching from the US dollar to the euro against the backdrop of the fragmentation of world trade and strengthening relations with Europe. This was stated by the head of the country's National Bank, Andrey Pyshny, in an interview with “Reuters” revealed.
Pyshny provided several reasons for such a drastic turn. Firstly, Ukraine's potential membership in the European Union logically and justifiably makes choosing the euro as the base currency. Secondly, the euro holds a higher value against the dollar in global markets.
“The possibility of joining the European Union, the strengthening role of the European Union in ensuring Ukraine's defense capability, the significant volatility in world markets, and the possibility of world trade fragmentation are forcing the National Bank to reconsider whether to switch the Ukrainian hryvnia's base currency to the euro instead of the dollar,” he said during his speech.
The head of the National Bank of Ukraine also emphasized that the share of operations in euros is already growing in most segments of Ukraine’s currency market.
“This work is complex and qualitative, requiring comprehensive preparation,” Pyshny added.
Ukraine is hoping for external financing to support military efforts. According to the National Bank head, Kyiv is expecting $55 billion this year, which will not only cover the budget deficit but also create a financial reserve for the coming years when the volume of aid may decrease.
For reference, Ukraine introduced the hryvnia in 1996 and has used the dollar as the main currency for decades.
In February 2022, the National Bank of Ukraine established control over capital movements and tightly pegged the hryvnia to the dollar, then was forced to devaluate due to accumulated budget imbalances.
