(Updates, adds changes to some currency controls)
By Natalia Zinets and Alessandra Prentice
KIEV Feb 22 The Ukrainian central bank will
take "anti-crisis measures" if a rail blockade in Ukraine's
war-torn east continues, resulting in lost foreign exchange
earnings, the head of the regulator told Reuters.
For the past month, opposition lawmakers and military
veterans have blocked rail traffic from territory held by
Russia-backed separatists, preventing vital coal supplies from
reaching Ukrainian power plants and the steel industry, whose
exports are a keystone of the economy.
"Of course there could be negative consequences for our
balance of payments," central bank Governor Valeriia Gontareva
said in an interview on Monday.
"We may see a drop in steelmakers' foreign currency revenue.
This could amount to maximum $2 billion, according to our top
estimates," she said.
Companies are already feeling the squeeze. On Monday,
Ukraine's largest steel producer, Metinvest, said the
blockade had forced it to halt production temporarily at one of
its mills and several coal mines.
Gontareva said last week in Washington she had discussed
with the International Monetary Fund, Ukraine's main creditor,
what steps should be taken in case of increased macroeconomic
turbulence stemming from the instability in the east.
"Our baseline scenario is that everything is working for
now, but we have a rainy day scenario," she said. "If
steelmaking stops we will take anti-crisis measures."
In 2016, steel-related exports generated $8 billion or
around 25 percent of total foreign currency revenue, according
to central bank data.
Gontareva said a worst-case scenario may require the bank to
impose extra restrictions on the currency market instead of
pushing ahead with IMF-approved softening of currency
The bank has promised to ease the strict currency controls
implemented in 2014 and in early 2015, when widespread panic
following deadly clashes between Ukrainian troops and
Russia-backed rebels pushed the national hryvnia currency to
A $17.5 billion IMF bailout package has since helped
stabilise Ukraine's economy, and the central bank has begun to
ease some of the restrictions including those relating to
mandatory foreign currency sales and limits on withdrawals.
Provided the threat of macroeconomic stability recedes, the
central bank is keen to improve conditions for exporters,
"Everything linked to export-import and foreign direct
investment is our priority. There shouldn't be any restrictions.
The top priority that we want to allow is the payment of
(foreign) dividends for 2016," she said.
To this end, the regulator on Wednesday removed restrictions
on mandatory currency sales for non-residents, provided the cash
is used as collateral to participate in tenders or auctions by
Gontareva said another possible step would be to raise the
limit on bank's foreign currency exposure to 5 percent of
capital from the current 0.5 percent among other possible steps.
(Editing by Hugh Lawson and Toby Chopra)