The National Bank of Ukraine (NBU) has increased control over foreign currency circulation in Ukraine. On 16 November 2012 NBU adopted the Resolutions No 475 and No 479 (effective starting from 19 November 2012) in order to change the settlement periods under export and/or import contracts and impose a mandatory requirement to convert the foreign currency revenues.
In particular, the Resolutions introduce the following novelties which will be in effect for the next 6 months:
- Ukrainian companies (i) must receive payments for exported goods (services) within a period of 90 days starting from the date of the customs clearance of the goods (date of the services delivery); and (ii) have 90 days to receive goods (services) that were prepaid under import contracts starting from the date of such prepayment.
NBU has in fact tightened the archaic rule (introduced in the early 90-s in order to prevent capital flight from Ukraine) regarding timeframes for financial settlement and deliveries under foreign economic contracts. Earlier mentioned periods for the receipt of payments for exports of goods (services) and/or the delivery of prepaid goods (services) was 180 days. Although the business community repeatedly insisted on the cancellation of this rule, this tool is still used by NBU from time to time (for example – in 2009-2010 when it was also shortened to 90 days) as a mechanism for control over the monetary market.
- 50% of the export revenues received by a Ukrainian company in foreign currency must be converted into Hryvnia on the day following the receipt of such funds;
This requirement is applicable to any revenues received by Ukrainian companies from the export of goods and/or services in the foreign currencies listed in the NBU’s 1st group of foreign currencies (which are freely convertible currencies widely used for international financial settlements - including USD, EUR, GBP etc.) or in Russian rubles. Such conversion is mandatory and will be automatically undertaken by the Ukrainian exporter’s servicing banks without any approvals from the exporter for such conversion.
The Resolutions No 475 and No 479 were adopted by NBU in line with the recently adopted Law of Ukraine No 5480-VI “On Amending Some Legislative Acts of Ukraine with respect to Extension of the Tools for Influence on the Money and Credit Market”. Under this Law the NBU is directly vested with the necessary authority: (i) to establish time frames for settlements other than those stipulated by the Ukrainian legislation for a period of no more than 6 months, and (ii) to introduce the requirement for mandatory conversion of revenues in foreign currency.
The Government and the NBU expect that these measures will prevent further foreign exchange losses and will also help to prevent a fall in Hryvnia’s exchange rates.
LAW: Law of Ukraine No 5480-VI “On Bringing Amendments to Some Legislative Acts of Ukraine with respect to Extension of the Tools for Influence on the Money and Credit Market” dated 6 November 2012
NBU Resolution No 475 “On Changing the Settlement Period under Export and Import Transactions and Imposition of a Mandatory Requirement to Sell Foreign Currency Revenues” dated 16 November 2012
NBU resolution No 479 “On Establishing the Amount of Foreign Currency Revenues Subject to the Mandatory Conversion” dated 16 November 2012