Fight for hryvnia: How National Bank is saving Ukraine’s currency from devaluation — and whether it will succeed

Buying dollars or euros during times of uncertainty is a typical behavior for Ukrainians. The war, unpredictable statements and actions by Donald Trump, and a slowdown in Ukraine’s economic growth are pushing citizens and companies to actively purchase foreign currency.

This poses a direct threat to the hryvnia’s exchange rate, yet the National Bank of Ukraine is working hard to smooth out fluctuations. The current hryvnia-to-dollar rate of about 41.3-41.5 has barely changed since the start of the year. On some days, the hryvnia even strengthens.

But this exchange rate stability comes at a steep cost. Since the beginning of the year, the NBU has sold about $9 billion from its reserves through currency interventions. This is significant, considering Ukraine expects to receive $38 billion in international aid this year.

A similar situation unfolded during Viktor Yanukovych’s presidency. Back then, the regulator burned through nearly half of its gold and foreign exchange reserves to prop up the hryvnia at 8 to the dollar. Yet, in 2014, the National Bank had to let the hryvnia slide despite earlier efforts to keep it at a level comfortable for the public.

What might happen this time? hromadske investigates.

What the central bank is doing to support the hryvnia

In just one week — from March 24 to 28 — the National Bank sold $845.6 million on the interbank foreign exchange market. It seems the bank will have to keep doing so in the coming weeks.

“The National Bank will likely intervene almost daily, selling between $70 million and $180 million. That’s enough to control the cashless dollar rate on the interbank market,” predicted financial analyst Oleksiy Kozyrev.

“The large volume of currency interventions stems from the unique way the foreign exchange market functions during the full-scale war. A significant portion of the financial resources to cover budget expenses comes from international partners in foreign currency. To fund budget expenditures in hryvnias, the government converts this currency into hryvnias through the National Bank,” the NBU’s press service explained.

This saga of large-scale currency interventions, during which the NBU sells off reserves, began in October 2023. On October 2, the National Bank announced it was shifting from a fixed hryvnia exchange rate to a regime of managed flexibility.

The International Monetary Fund has called for this shift and continues to do so. In a recent press release, where IMF analysts noted the difficulty of predicting the war’s course, they stated: “Greater exchange rate flexibility will help strengthen economic resilience while safeguarding reserves.”

But here’s the catch: The central bank is opting to dampen exchange rate swings rather than letting the hryvnia be “too flexible.” In January this year, the regulator sold $3.76 billion; in February, another $3.06 billion. For comparison, in January 2024, it was $2.55 billion, and in February 2024, $1.54 billion. The increase in reserve sales is clear.

Before this, the NBU allowed certain categories of companies to move some currency abroad — a move dubbed “currency liberalization,” which the regulator plans to continue.

Still, the NBU insists interventions are a standard practice and there’s no cause for currency panic.

“Let me remind you that since martial law began, as of early 2025, Ukraine has received over $117 billion equivalent from international partners. Of that: $86 billion went to currency interventions; $15 billion covered external government and NBU obligations; and the remaining $16 billion was a net increase in international reserves,” said Oleksandr Arsenyuk, the newly appointed director of the NBU’s open markets department.

The regulator’s explanation clarifies that international aid first bolsters its reserves, after which the regulator sells it — not just to meet public demand but also to support importers, including those fulfilling state contracts, like Ministry of Defense orders. Large-scale interventions are unavoidable.

“The main demand for currency comes from companies with budget contracts buying imported materials; importers of critical goods; and the population purchasing currency to preserve savings,” said Dilyara Mustafayeva, head of the analytical department at Financial Pulse. “The NBU uses the ‘managed flexibility’ regime to smooth exchange rate fluctuations and meet market needs. Currency interventions are a necessary mechanism to maintain macroeconomic stability under current conditions.”

According to the Growford Institute, in 2024, the central bank spent 87% of the external aid Ukraine received on currency interventions — a wartime record. In 2023, it was 68%, and in 2022, it was 75%.

“There’s a significant imbalance of supply and demand on the domestic currency market, which administrative measures like strict controls on capital outflows haven’t offset. Alongside tight oversight of all currency transactions, the NBU is actively intervening in the interbank market to sell currency to importers,” explained Dmytro Churin, head of the analytical department at Eavex Capital.

Simply put, if Ukraine’s exports outpaced imports, there likely wouldn’t be a currency shortage. Official data shows that in 2024, Ukraine exported $56 billion in goods and services while importing $92 billion, leaving a trade deficit of $36 billion. That year, the NBU sold about $35 billion on the currency market but bought just $126 million.

“A negative trade balance isn’t new for Ukraine, but in the past, businesses could attract foreign loans and investments, which is much harder now,” Churin added.

“The NBU’s current actions suggest it views a rate slightly above 41.5 hryvnias per dollar as comfortable and is working to prevent further weakening through larger interventions. The currency market is currently stable, with a relatively large but steady deficit. This means the NBU can maintain this approach in the coming weeks unless there’s a sharp, significant spike in interbank currency purchases,” analysts at ICU investment company said.

But it’s not just about funding imports. People are also rushing to buy currency amid uncertainty.

According to the regulator’s data, in 2024, the public’s net cash currency purchases — the difference between buying and selling — hit $11.1 billion. In 2023, it was just $3.4 billion.

There is an explanation for this. The Ministry of Economy reports that in 2024, Ukraine’s average salary rose 20.3% to 20,985 hryvnias ($523). With higher incomes and more disposable cash, Ukrainians have increased their investments in foreign currency.

“No matter what channel the public uses, the source to meet currency demand is the same: NBU interventions,” explained Oleksandr Arsenyuk from the National Bank.

This isn’t just about savings, either. The press service of one of Ukraine’s largest banks, Oschadbank, noted steady demand among clients for foreign currency:

“Foreign currency is a savings tool. Clients also continue planning trips abroad and paying for overseas education. Demand can be influenced by seasonality, with fluctuations before major holidays or the start of school terms.”

“Public demand for currency depends on exchange rate expectations and seasonal factors. Recently, this demand has been trending downward. The volume of currency bought by clients for settlements with international payment systems (stemming from Ukrainian bank card use abroad) remains relatively stable,” the NBU said. “Meanwhile, the euro’s role in Ukraine’s currency market is growing.”

“The structural currency deficit in the private sector remains significant. The NBU will continue covering this deficit and smoothing excessive exchange rate fluctuations,” the agency added.

Given the National Bank’s readiness to sell substantial currency volumes, one might not worry about the hryvnia’s rate or potential devaluation. But the question remains: How long will the NBU’s reserves hold out to meet this demand?

Currently, the NBU’s reserves stand at $42.4 billion. They’re likely to grow, too. The IMF expects clarity on securing $50 billion from frozen Russian assets, projecting NBU reserves to reach $56.8 billion by year-end.

But there are caveats. First, Ukraine has asked the IMF to delay payments for budget needs, as it’s unclear whether new aid programs will materialize. Funds must be conserved. The latest IMF tranche for Ukraine’s budget was just $400 million, though $2.7 billion was planned for this year.

Second, as Danil Getmantsev, head of the Verkhovna Rada’s finance committee, explained, new funds added to central bank reserves should be saved for later. If Ukraine receives $17.5 billion from frozen Russian assets this year (out of $300 billion frozen, with $50 billion pledged to Ukraine), they’ll fund the 2026-2027 budget deficit ($8.4 billion) and create a buffer for adverse scenarios ($9.1 billion) — like if the war extends into 2026. This could limit the NBU’s ability to sustain interventions and meet currency demand.

And they may be needed indeed. In mid-April, farmers will reduce currency sales from export earnings after completing pre-sowing preparations — buying seeds, fuel, fertilizers, and setting aside funds. Currency supply will drop, forcing the regulator to act again.

Will the hryvnia devalue in the near future?

A survey by the Rating sociological group found 33% of Ukrainians are most worried about rising prices, while 32% fear a worsening economy. Meanwhile, 27% are concerned about intensified airstrikes, and 25% dread further territorial occupation.

“People have adapted to attacks and no longer perceive them as they once did. Naturally, they’re now more focused on economic issues and the problems they face,” said political scientist Ihor Petrenko.

Thus, the hryvnia’s exchange rate — which affects consumer price growth, already up over 13% from last year — is a major concern. What’s next for the currency?

“The NBU’s task is to maintain a controlled situation on the currency market. This means fluctuations in both directions that won’t threaten returning inflation to the NBU’s 5% target within its policy horizon. That task is being met,” the NBU press service said.

Analysts polled by hromadske offered restrained, calm forecasts.

“If the situation doesn’t change drastically, the hryvnia could lose 10-12% of its value by the end of 2025, aligning with a rate of about 46 hryvnias per dollar. The budget forecast of 45 hryvnias per dollar is also a benchmark, but the actual rate will depend on future developments,” said Dilyara Mustafayeva from Financial Pulse.

“Buying foreign currency protects savings, but excessive demand risks devaluation, creating a vicious cycle. Long-term deposits with high rates could be a smart alternative to safeguard funds, especially since the state guarantees 100% deposit returns during martial law, regardless of amount,” she added.

Oschadbank predicts the rate could hit 45 hryvnias per dollar by year-end. They cite global factors affecting Ukraine’s economy and exchange rate — elements that are hard to predict.

“Under the baseline scenario, we can confidently rule out the hryvnia devaluing by more than 10% this year. The current year-end forecast is 45.7 hryvnias per dollar,” ICU analysts said.

Serhiy Mamedov, chairman of Globus Bank, expects the official rate in Q2 to average 41.8-42.8 hryvnias per dollar. That’s a potential 1.8% rise from the start of the year through July.

Still, there are other views. Dmytro Churin from Eavex Capital said: “For now, baseline economic scenarios suggest a gradual hryvnia devaluation to 52 hryvnias per dollar over the next three years. But positive scenarios, where Ukraine secures significant foreign investment to improve its balance of payments and support the currency, can’t be ruled out.”

Demand for foreign currency isn’t likely to wane soon. Oleksiy, the 39-year-old from Kyiv, plans to keep buying dollars when he has spare cash, despite wanting to believe in Ukraine’s economic resilience.

“The hryvnia has survived many trials. Devaluation is possible if the war escalates, triggering another wave of emigration and economic collapse. Only those with dollar or euro savings won’t feel it. It’s a kind of Ouroboros ring, working against the hryvnia,” he said.

The Ouroboros — a mythical serpent eating its own tail — symbolizes a cycle where Ukrainians buy currency for personal financial security but collectively undermine themselves on a larger scale.