There are less and less possibilities to use foreign currency in Ukraine. Resolution of the National Bank No. 534 forbade banks to provide loans to legal entities, private entrepreneurs and representatives of non-resident enterprises in foreign currency in order to use these funds in the domestic market of Ukraine. Exception make loans provided to be spent on the implementation of foreign liabilities.
The intended use of the foreign currency loans has yet not been limited for corporate clients.
Ban on lending in foreign currency will also affect agricultural enterprises. They will have to look for more affordable sources of funds. "Except for foreign trade contracts, banks provide pre-export financing to enterprises in foreign currency. Now it is most important for agricultural enterprises: sowing, harvesting, sale, storage, formation of a warehouse for processing, such as sunflower seeds for oil processing enterprises. Such financing is provided to export-oriented companies with foreign currency earnings, which do not bear the foreign currency risks as the loan is repaid from the export earnings. At the same time, it can significantly reduce the cost of the resource − the difference is double in case of the average cost of funding in the currency of 10-12% and 20-23% in the national currency", a banker explains.
The present decision of the NBU is very bad news for farmers, since it will increase the cost of debt twofold. Many borrowers simply will not cope with such rising costs. Banks are threatened by an increase in the share of overdue loans and, in some cases, by defaults.
In addition, bankers admit that until now such loans were not always used for their intended purpose. There were examples, when banks used such lending to convert funds of enterprises in the national currency into foreign currency. "The scheme looked like this: the company was issued a loan, the money remained on its account, and on the next day hryvnia were used to buy foreign currency for the repay of the loan. Thus, as the result of such transactions, the company remained with the foreign currency in the account," explains Deputy Chairman of FUIB Alexei Volchkov. The prohibition of such schemes will reduce the demand for foreign currency, although the total volume of these transactions is likely to be limited."
Full version of the article is available on the website Comments.
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