On 24 November 2009, the Ukrainian government introduced a number of limitations to minimise the consequences of the global financial crisis. The lifting of these limitations should signal to potential investors that Ukraine feels confident about the future of its economic and financial system.

Bans lifted

In May 2010, the Ukrainian government lifted the following.

  • The ban on early repayment of loans by resident borrowers to non-resident lend-ers. The pre-term fulfillment of obligations of resident borrowers vis-à-vis non-resident lenders under cross-border financings is no longer prohibited.
  • The ban on amendments to loans whereby repayment terms were shortened. In particular, it is no longer prohibited to introduce amendments whereby the terms of performance of obligations of resident borrowers vis-à-vis non-resident lenders were shortened, or an early repayment is agreed upon. It is no longer prohibited for the National Bank of Ukraine to register amendments of such nature to the already existing loans.
  • The ban on foreign investments in currencies other than Ukrainian national cur-rency (UAH). Foreign investments in monetary form could only be made in the na-tional currency of Ukraine via investment accounts opened by foreign investors with Ukrainian banks and under a procedure set by the National Bank of Ukraine.
  • The ban on settlements between non-resident investors (eg regarding shares in Ukrainian companies) in currencies other than the national currency of Ukraine. Such settlements do not have to be made in UAH.

Previously the government was concerned about Ukrainian individuals taking currency exchange risks. Starting on 1 January 2011, financial institutions will not be prohibited from granting loans in foreign currencies to Ukrainian individuals.

In order to exercise greater control over lending, the government restricted loans granted in cash. Starting on 1 January 2011, the granting of loans in foreign currency and the repayment of loans (as well as the payment of interest) do not have to be made by wire transfers, ie such loans may now be granted and repaid in cash.

Reintroduction of maximum interest rates

In order to attract long-term foreign capital regardless of price, the National Bank of Ukraine on 25 September 2008 lifted a limitation on interest rates on loans granted for over one year. However, starting from 15 October 2009, the limitation of interest rates under cross-border loans is again in force, as follows:

  • for loans under one year, not to exceed 9.8% p.a.;
  • for loans of one to three years, not to exceed 10% p.a.;
  • for loans of over three years, not to exceed 11% p.a.

Floating interest rate may not exceed the LIBOR for three months deposits in USD plus 750 basis points. The re-imposition of maximum interest rates shows that the National Bank of Ukraine is no longer concerned about just attracting foreign loans at any cost, but is also conscious of the interest rates for such loans.

Currency loosened

Certain currency control restrictions have also been loosened providing more freedom in export and import transactions. Starting with 23 June 2009:

  • currency proceeds from the export of goods and services had to be credited to the exporter's account within 90 days of customs clearance for export or confirmation on service delivery; and
  • importers could agree on a prepayment for goods and services up to 90 days prior to the customs clearance for import of such goods and services or confirmation on service delivery.

These terms were extended to 180 days starting with 11 February 2010. The 180-day term may be exceeded if a positive conclusion from the Ministry of Economy and Industrial Policy of Ukraine is obtained for each transaction.

The above changes, reflecting Ukraine's confidence about its economy and financial sys-tem, were recently supported by the international credit rating agencies, who all upgraded Ukraine's short- and long-term outlooks to stable.