Politicians everywhere are making life and business more difficult, and here is another example. New rules requiring identification when exchanging money. Today however, I changed some USD into local currency without ID. Maybe the rule has not been implemented fully yet?
Also, there were rumors that Ukraine had defaulted on some debt last week, but nothing officially reported. Meanwhile, the currency weakens…
New currency exchange rules unleash confusion, anger; expats most affected
Sep 29 at 23:56 | Kateryna Panova and Jakub Parusinki
Since last week, nobody in Ukraine can legally buy or sell a single dollar without showing an identity document.
The complex new rules – which have confused foreigners, Ukrainians and banks alike – were introduced by the National Bank of Ukraine (NBU) on Sept. 23 in what it described as a way to combat money laundering and the shadow economy. The NBU said it believes that some $70 billion in foreign currency is now in circulation, untaxed and unregulated.
But in reality, analysts say, the government is trying to keep people from selling too many hryvnias and thus weakening the national currency.
With the global economy stagnating and possibly on the verge of sinking back into recession, Ukraine is expecting low foreign currency earnings from exporters and high currency demand from pessimistic Ukrainians who prefer to keep their savings in dollars.
But instead of bringing order and stability, the new rules have sparked confusion, mistrust and anger. The National Bank failed to properly explain the troublesome new rules, which are based on a 1993 Cabinet of Ministers decree, to the commercial banks that are supposed to implement them.
Banks are now obliged to store copies of IDs and have them ready at the National Bank’s whim. For transactions over Hr 50,000, an identification code, issued by the tax authorities, is needed.
Still recovering from the 2008-2009 global economic crisis, Ukraine’s bank sector is unimpressed.
Oleksandr Sugonyako, head of the Association of Ukrainian Banks, calls the new rules “a mistake,” and in a letter to the NBU asked to cancel them. In a time of global economic instability, “adding to this destabilization is wrong,” he said.
Whatever the real reason behind the rules, exchanging money has become a bureaucratic hassle. The immediate impact has been a growth in queues at exchange spots, as well as in the number of frustrated people unable to exchange money.
At first everybody was shocked. We did not know what to do. Piles of papers – how can they make the market more transparent?
- Natalya Napadovska, head of communications at Finance and Credit Bank.
While the law says that any ID proving identity and residence should be accepted, some banks have refused to serve customers with driver licenses, external passports or other documents – anything other than a Ukrainian internal passport.
However, the Kyiv Post established that it is possible to change money using someone else’s passport and a fake signature. Bank workers do not all check the details properly.
“At first everybody was shocked. We did not know what to do. Piles of papers – how can they make the market more transparent?” asked Natalya Napadovska, head of communications at Finance and Credit Bank.
Currency exchange operations now last significantly longer and more people are changing their money at big banks, as Ukraine’s ubiquitous small exchange booths often lack the equipment to comply with the new rules.
Meanwhile, providing somebody with a copy of your passport, containing the home address, and giving them an identity number is dangerous, as these documents are sufficient for a fraudster to take out a loan in your name, Sugonyako said.
Foreigners experience additional difficulties. The National Bank ruled that foreigners are not allowed to change hryvnias to foreign currency unless they possess documents proving they had previously bought at least the same amount of hryvnias in Ukraine.
To avoid the headaches, some banks are simply avoiding transactions with foreigners altogether.
Nadya Kravets, an Oxford University student on a visit to Kyiv, complained to the Kyiv Post that the government-owned Oschadbank would not accept her American Green Card as an ID.
“They just advised me to try another bank around the corner,” said Kravets, who is left with no money for her daily expenses.
At Pravex Bank in downtown Kyiv on Prorizna Street, a Kyiv Post reporter was told that to exchange dollars into hryvnias, a foreigner needs a passport and a residence certificate.
Such documents give foreign citizens permission to stay in Ukraine for longer than 90 days, but they are not issued for many categories of travelers, including short-term visitors. An elderly Canadian at the bank was thus turned away, the dollars intended to cover his trip to Ukraine unchanged.
At a Piraeus Bank branch office in the center of Kyiv, another version of the new rules was given.
Changing hryvnias into foreign currency is not possible for foreigners unless they can produce a so-called Certificate 377, a bank document attesting to a prior currency exchange, apparently received when changing foreign currency to hryvnias.
The certificate allows foreigners to change their money back, at the original rate, though only at the place of the original transaction and up to the limit of the initial sum.
This year Ukrainians bought $7.8 billion more currency than they sold. This is a huge and serious amount. The National Bank cannot – or does not want to – fight with this situation with market methods. So, they are just trying to forbid it.
- Olexandr Zholud, a senior analyst at the International Center for Policy Studies
In spite of numerous requests, the Kyiv Post could not get the National Bank to explain how foreigners should exchange hryvnias if they do not have such a certificate, for example if they bought their hryvnias before the new rules came into force.
Experts said the new rules could lead to an increase in black market transactions. An invitation-only Facebook page, under the self-explanatory name of “Currency exchange Kyiv”, is already up and running.
The National Bank’s statements that the new strict rules of exchange are meant to increase market transparency have been met with skepticism by analysts.
“There is no need to control all transactions. The National Bank can perfectly well understand through which banks the large amounts of currency cash go to the market, and control them,” said Vitaly Vavryshchuk, senior analyst at BG Capital, a Kyiv-based investment bank.
Olexandr Zholud, a senior analyst at the International Center for Policy Studies, said that by imposing stricter rules the government wants to stop Ukrainians from buying foreign currency as fears of a hryvnia devaluation increase. Over the past month, Hr 800 million was withdrawn from hryvnia deposits – the largest outflow since the crisis in October 2008.
“This year Ukrainians bought $7.8 billion more currency than they sold. This is a huge and serious amount. The National Bank cannot – or does not want to – fight with this situation with market methods. So, they are just trying to forbid it,” Zholud said.
Yet driving away ordinary Ukrainians and foreigners from the currency market is only part of a bigger game. Banks exchange three times more currency between each other.
Foreign currency revenues from Ukrainian exports are expected to decrease due to a fall in demand for their products on global markets, which are now experiencing a period of stagnation, Vavryshchuk said.
The National Bank continues using different monetary instruments to purchase hryvnias from banks to prevent them from buying foreign currency, in turn weakening the hryvnia exchange rate. As a result the hryvnia is stable for now.
But given Ukraine’s rising foreign debt liabilities, what will happen later depends on progress in negotiations with the International Monetary Fund.
Few doubt that with parliamentary elections set for October 2012 the National Bank will continue playing hardball and do anything it can to prevent the hryvnia from falling.
(www.kyivpost.com)
