Hryvnia in 2025: Why a Record Balance of Payments Deficit Didn’t Trigger Devaluation
Ukraine’s balance of payments is entering a deep deficit phase. According to the latest data from the National Bank of Ukraine, in July 2025, the current account deficit reached $4.1 billion the highest figure recorded during the years of full-scale war. Yet despite such alarming signals, the hryvnia exchange rate remains stable and, at times, even strengthens. For many, this seems paradoxical, but behind this stability lies a carefully designed logic.
A sharp increase in goods imports with only a slight growth in exports became the primary source of the imbalance. In July, imports rose by 19.9% year-over-year, while exports increased by just 3.1%. In monetary terms, exports amounted to $3.1 billion, while imports totaled $7.6 billion. Outflows of foreign currency exceeded inflows by $4.5 billion. In the services trade segment, the situation remained unchanged: a deficit of $0.6 billion with almost synchronized declines in both exports and imports. The impact of this segment on the overall balance of payments was neutral. However, the main pressure concentrated in the current account, where the trade deficit was compounded by a drop in international aid. In previous months, non-repayable support from Ukraine’s partners had partially offset structural problems. In July, that buffer proved too thin.
Why the Exchange Rate Doesn’t Fall: Mechanisms of Currency Stability
At this point, it’s logical to ask: why isn’t the hryvnia devaluing amid such imbalances? The answer lies in the actions of the National Bank, which in 2025 plays not only the role of monetary regulator but also de facto the architect of currency resilience. Oleksandr Parashchiy, Head of Research at Concorde Capital, states plainly:
“The trade balance deficit puts pressure on foreign exchange reserves. In fact, it doesn’t really pressure the hryvnia exchange rate. As far as I understand, the NBU offsets the trade imbalance with currency interventions.”
This means that currency stability is preserved not by balancing foreign trade but through direct NBU actions selling foreign currency reserves on the interbank market. This strategy allows the central bank to smooth out exchange rate fluctuations that would otherwise be inevitable.
Underneath the Stability: Reserves
At the end of July, the NBU’s gross reserves amounted to $43 billion. In August, following new tranches of external support, they grew to $46 billion. These figures are more than just symbols of stability. According to the regulator, this amount covers 4.7 months of critical imports. This means that even if new currency inflows stopped, Ukraine could sustain its economy without exchange rate stress for a certain period. But this formula only holds as long as partner funding continues.
Policy over Market: The Role of NBU Decisions
The fundamental truth that economists do not hide is this: today’s hryvnia exchange rate is a political decision, not the result of supply-and-demand interaction. Serhiy Fursa, Deputy Director of Securities Trading at Dragon Capital, confirms:
“Any developments in the balance of payments or trade balance don’t affect the hryvnia exchange rate right now. The situation is solely influenced by the NBU’s intention to maintain the hryvnia rate. The National Bank will definitely hold the rate through the end of the year.”
This implies that even amid a record current account deficit, there may be no devaluation unless the regulator allows it. Such a decision would be based not only on economic conditions but also on broader macro-political calculations.
Manual Control Mode
In its response to journalists, the National Bank of Ukraine clearly outlined how it maintains equilibrium:
“We continue to sell a lot of currency on the market, but at the same time, we replenish our international reserves by purchasing the currency from the government, which, in turn, receives this currency as international aid.”
In other words, the market is under administrative control not in the sense of restrictions, but through a complex financing model in which foreign currency enters via the state and is redistributed through the market with the NBU’s involvement. At the center of this setup is a core objective: price and exchange rate stability as the key to maintaining economic manageability during wartime.
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Currency Policy and Business Development: Where the Line Is Drawn
Despite currency stability, the business community is increasingly facing constraints from foreign exchange regulations shaped under wartime economic conditions. In particular, Ukrainian machine-building companies have encountered difficulties in fulfilling contracts due to overly short settlement deadlines. That is why the Ukrainian Government appealed to the National Bank to increase the settlement period in the machine-building sector from 180 to 270 days. This initiative had its logic: damaged infrastructure, a shortage of components, import dependence, and logistical delays all make it harder to meet the current currency requirements. However, the NBU rejected the request, citing the need for additional analytical justification. Oleksii Sobolev, Deputy Minister of Economy, explained:
“The destruction of infrastructure due to Russian attacks forces Ukraine to import additional equipment, and this creates extra pressure on the balance of payments.”
The Government and the NBU are currently working on creating a new system of currency control that will take into account industrial challenges without harming external economic equilibrium. But this is a lengthy process, and for now, currency rules remain strict.
How Long Will the Current Model Hold
The foundation of stability is external financing, which allows the NBU to carry out currency interventions without rapidly depleting reserves. But even here, there are caveats. Oleksandr Parashchiy emphasizes:
“For 2025, funding from external partners for Ukraine is guaranteed. And the NBU maintains an optimistic forecast for international reserves at the end of the year. For next year, the NBU’s forecast for reserves is $9 billion lower. So next year, there may be a weakening of the hryvnia.”
This means that 2025 will be marked by stability, but 2026 could be a turning point. If the volume of financial support declines or if import volumes rise even further, the NBU will have to reassess its policy. Meanwhile, investment firm ICU forecasts only moderate depreciation:
“We forecast an exchange rate at the end of 2025 not exceeding 42.6 UAH/USD. We also expect only moderate hryvnia depreciation against the dollar next year within 7%.”
Thus, today’s stability is the result of deliberate policy, but it is not permanent.
The Principle of Transparency as the Foundation of Trust in the NBU
The resilience of the current model largely rests on trust in the regulator. And the NBU is trying to uphold this trust. In its official comments, the regulator stresses:
“We continue to adhere to the principle say what you do, and do what you say.”
This means that even amid a current account deficit, the NBU’s policy remains predictable. It is transparency and consistency that make it possible to keep the macro-financial situation under control. And although experts do not rule out depreciation in 2026, it will be considered a monetary policy tool, not a forced response to crisis.
At first glance, the hryvnia exchange rate appears surprisingly stable even amid a record balance of payments deficit. But this stability is not a market outcome. It is the product of currency interventions and massive foreign assistance. All key players understand: the current equilibrium is only possible as long as there is trust in the regulator and a steady inflow of foreign currency. As of today, foreign exchange reserves, partner support, and the NBU’s resolve give Ukraine time. But that time is not unlimited. Sooner or later, market signals of imbalance will require a response. And at that point, the regulator will face a choice to adjust the exchange rate or find new forms of compensation that won’t undermine the fragile but, for now, stable currency framework.
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