The NBU cancels currency restrictions: what has changed

The National Bank is implementing the largest package of currency restrictions for businesses since the beginning of the full-scale war. The purpose of these changes is to improve the business environment in Ukraine and to allow domestic businesses to enter new markets, as well as to support economic recovery and facilitate the inflow of new investments into the country.

Given that the necessary prerequisites have been met and the NBU has carefully analyzed each individual measure, the changes should not create additional risks to macrofinancial stability and foreign exchange market stability. They have already been taken into account in the updated macroeconomic forecast, which envisages that international reserves will remain close to the current level (USD 43-44 billion) this year and next.

The changes will affect several areas. The vast majority of them came into effect on May 4, 2024, with only the possibility of repatriating "new" dividends coming into effect on May 13, 2024.

First, all currency restrictions on imports of works and services are lifted.

The NBU ensures that businesses can buy and transfer foreign currency abroad for imports of works and services. Due to these changes, the Resolution of the Cabinet of Ministers of Ukraine No. 153 "On Certain Issues Related to Ensuring Imports" dated February 24, 2022 is no longer relevant. In view of this, the NBU will address the Government of Ukraine with a proposal to cancel it.

In addition, the NBU has separately ensured that businesses can purchase foreign currency and transfer funds abroad to pay airport and port fees, fines, and membership fees. This is due to the fact that the above-mentioned resolution of the Government of Ukraine also partially contains the relevant transactions.

Such changes will support Ukrainian producers and enable domestic businesses to enter new markets, including those from which the aggressor country's producers are being forced out due to sanctions. This, in turn, will contribute to a gradual increase in export revenues to Ukraine. It is worth reminding that a similar easing of restrictions on imports of commodity products was implemented in July 2022.

Secondly, the NBU has provided businesses with the opportunity to repatriate "new" dividends.

Businesses will be able to repatriate dividends on corporate rights or shares abroad accrued based on the results of operations for the period starting from January 1, 2024. This mitigation does not apply to dividend payments from retained earnings for previous periods or reserve capital.

To minimize risks to macrofinancial stability, the NBU has set a monthly limit for repatriation of "new" dividends at EUR 1 million in equivalent. The NBU's automated information system E-limits will be used to monitor compliance with this rule.

Allowing the repatriation of "new" dividends will facilitate the inflow of new investments to Ukraine, minimize the risks of curtailing the activities of enterprises with foreign capital and support the economy.

Thirdly, it is now possible to transfer funds abroad under leasing/rental agreements.

Legal entities and individual entrepreneurs will be able to transfer funds abroad to settle leasing/lease agreements without additional restrictions on the subject of the lease/lease, as well as the date of the agreement. Previously, this permission was only applicable to leasing/rental of vehicles.

The respective changes will also allow businesses to pay off previously concluded leasing/rental agreements, which will actually make it possible to conclude new agreements and attract the necessary equipment to Ukraine for business activities.

Fourth, restrictions on the repayment of "new" external loans are being eased.

The NBU is simplifying the conditions for residents to purchase foreign currency to service and repay "new" external loans, which are received in foreign currency from abroad after June 20, 2023, to borrowers' accounts in Ukrainian banks.

In particular, the minimum period for using a "new" loan, after which it is allowed to purchase foreign currency to repay such a loan, is reduced from three to one year. Accordingly, the prohibition on purchasing foreign currency to repay "new" loans will apply exclusively to short-term loans with a maturity of up to one year.

In addition, the NBU will allow businesses to purchase foreign currency to pay interest on "new" loans, regardless of the term of the loan.

All this will help Ukrainian businesses to attract new external loans not only from official partners but also from private investors.

Fifth, the possibility of repaying interest on "old" external loans has been provided.

Resident borrowers will be able to transfer funds abroad to pay interest payments on "old" external loans, which, according to the terms of the loan agreement, are due from February 24, 2022.

For overdue (as of May 1, 2024) interest payments, the NBU has granted the possibility to transfer no more than EUR 1 million in the equivalent per calendar quarter. However, this restriction will not apply to future scheduled interest payments.

To protect macrofinancial stability, additional conditions for such transactions are also provided for:

• no overdue debt under the relevant loan agreement as of February 24, 2022;
• it is prohibited to purchase and transfer funds at the expense of loans or credits received from residents;
• no provision for early payment or restructuring of overdue payments.

These changes will help minimize the likelihood of defaults by Ukrainian borrowers and provide more favorable conditions for restructuring external loans, as well as improve the conditions for attracting new capital to Ukraine.

Sixth, restrictions on the transfer of foreign currency from representative offices to their parent companies are being eased.

The NBU will allow representative offices of international card payment systems and foreign airlines to purchase and transfer foreign currency abroad to the account of a non-resident legal entity whose interests these representative offices represent in Ukraine. The monthly limit for such transactions (by one representative office of one company) is set at EUR 5 million in equivalent. These changes will, in particular, facilitate the further development of cashless payments in Ukraine.

These and a number of other technical amendments were introduced by Resolution of the Board of the National Bank of Ukraine No. 56 "On Amendments to Resolution of the Board of the National Bank of Ukraine No. 18 dated February 24, 2022" dated May 3, 2024.

The vast majority of the document's provisions will come into force on May 4, 2024, with only the amendments regarding the repatriation of "new" dividends coming into force on May 13, 2024.