The slow recovery of the commodities markets and the gradual improvement of the investment and business climate in Ukraine have permitted the National Bank of Ukraine, Ukraine's central bank, to launch long-overdue steps to ease strict controls on the cross-border movement of capital and other foreign exchange restrictions.  The National Bank of Ukraine sees these steps as just the start of a full overhaul of the outdated foreign currency control rules.  If the foreign currency reserves of the National Bank of Ukraine are maintained at a level perceived as safe (above USD 18 billion, which is yet to be achieved from the current USD 13 billion but possibly will be when the IMF resumes funding), most of the capital controls and foreign exchange restrictions are likely be liberalized. 

On 7 June 2016 the National Bank of Ukraine extended certain "extraordinary" capital controls and foreign exchange restrictions and eased some of the existing measures1 up to 14 September 2016.

The following are most notable changes in the long list of "extraordinary" capital controls and foreign exchange restrictions. 

  1. Dividends

The National Bank of Ukraine permitted foreign investors entitled to dividends for 2014 and 2015 to repatriate such dividends from Ukraine, provided that in a calendar month the amount of repatriated dividends cannot exceed the higher of either (a) USD 1 million; or (b) 10 percent of the overall amount of dividends to be paid to a single shareholder but not exceeding the overall monthly threshold of USD 5 million. 

  1. Sale of Foreign Currency Proceeds

The NBU decreased the threshold for mandatory sale of the foreign currency proceeds received by Ukrainian businesses from abroad from 75% to 65% subject to certain exceptions.  Such sale of foreign currency proceeds is made by the Ukrainian bank automatically without prior authorization from its client.

  1. Quicker Process for FX Purchase 

The National Bank of Ukraine has shortened the minimum "stay" period for reserving UAH for the purchase of foreign currency by Ukrainian banks for its clients from three to one business day.  The purchase of foreign currency on the interbank market would need to follow the usual confirmation process of the National Bank of Ukraine which takes three business days.

Also, the National Bank of Ukraine exempted cross-border payments of Ukrainian residents in favor of certain international financial organizations for services rendered under specific projects with a value exceeding EUR 50,000 from the need to obtain a price assessment act from a specialized state company monitoring external commodities markets or specific approval2.

  1. Cash Operations Limits Lifted

Some of the limits for operations with cash by individual bank customers were lifted as follows:

  • cash withdrawal limit in foreign currency from a bank account is set at the equivalent of UAH100,000 (c. USD4,000) per day instead of the earlier limit of UAH50,000 (c. USD2,000);
  • UAH cash withdrawal limit was lifted completely instead of the earlier limit of UAH500,000 per day (c. USD20,000);
  • foreign currency purchase limit was lifted from UAH6,000 (c. USD240) to UAH 12,000 (c. USD480) per day in one bank.
  1. Remaining restrictions

The remaining restrictions are still numerous and include the following:

  • restriction on early repayment of cross-border loans subject to certain exceptions;
  • restrictions on set-offs under export agreements subject to certain exceptions;
  • prohibition on banks extending loans in UAH for the purchase of foreign currency secured by pledge of funds in foreign currency subject to certain exceptions;
  • prohibition on purchasing foreign currency for corporate clients of Ukrainian banks that have foreign currency funds in their current bank accounts or even in deposit accounts subject to certain exceptions; 
  • prohibition on purchasing and transferring foreign currency to foreign investors as a result of selling shares/corporate rights in Ukrainian companies as well as the repayment of capital upon liquidation of a company or decreasing its capital subject to certain exceptions.