Some news about Ukraine's currency. Ukraine Devalues Hryvnia to Adjust to War-Time Economic Reality https://finance.yahoo.com/news/ukraine-devalues-hryvnia-plug-drain-071652086.htm (Bloomberg) -- Ukraine’s central bank devalued the hryvnia and said it may keep interest rates at 25% for another two years to protect its dwindling foreign-currency reserves as Russia’s invasion ravages the economy. The National Bank of Ukraine said the “shift in the fundamental parameters” of Ukraine’s economy during the war, along with the dollar’s strengthening, triggered the currency adjustment. It set the official hryvnia rate at 36.5686 per dollar compared with 29.25, where it had been frozen for the past five months. The devaluation comes a day after Ukraine’s request to postpone foreign-debt payments won support from key creditors, including the US. The currency will be fixed at the new level after hryvnia trading was suspended and capital controls tightened in February in a bid to help the government import crucial goods during wartime. “This will give the authorities more breathing room to cope with the financial pressures,” said Kaan Nazli, an economist & portfolio manager at Neuberger Berman Asset Mgmt Irl Ltd. While inflation is set to tick higher on the move, Nazli said, prices are “much more affected by supply-chain disruptions” due to war, hence “there is little to be gained from propping up the currency.” Ukraine’s dollar bonds due in 2033 were little changed on Thursday, trading near 18 cents on the dollar, compared with 25 cents at the start of the month and more than 80 cents before Russia’s invasion. War Costs The central bank said that price growth could top 30% by December but decline to about 21% next year. The economy probably shrank about 40% in the second quarter, compared with a year earlier, according to its forecasts. The central bank expects the main rate to stay at 25% until at least the second quarter of 2024. Ukraine may reach a new deal with the International Monetary Fund as soon as next year, it said, without going into details. “Improved attractiveness of hryvnia assets, coupled with the change in the official exchange rate and additional economic policy measures, will dampen demand on the FX market,” the central bank said in a statement. “Taking into account the planned inflows of official financing, this will help support the sufficient level of international reserves and thus maintain macro-financial stability.“ The monetary authority said it could theoretically finance the government budget with as much as 30 billion hryvnia per month, a level in line with previous plans, without triggering “serious” inflationary pressure. The government has been slow in adjusting yields on its bonds after June’s 15 percentage-point rate hike. Keeping the hryvnia strong in past months has taken its toll on Ukraine’s international reserves, as the war slashed the country’s foreign income. Exporters became reluctant to convert hard-currency inflows at the official rate, which didn’t take into account nearly half a year of economic deterioration. “This step will improve the competitiveness of Ukrainian producers, converge exchange-rate conditions for different groups of businesses and households, and support the resilience of the economy during the war,” the central bank said.
China Steps Back: Belt And Road Spending In Russia Drops To Zero To Avoid Sanctions Amid Ukraine War https://www.benzinga.com/government...s-to-zero-to-avoid-sanctions-amid-ukraine-war Beijing signed no new deals with Russian entities under its Belt and Road Initiative in the first half of 2022. While China avoided investments in Russia, Jinping's government deepened its engagement with the Middle East. China’s Belt and Road Initiative investments in Russia have fallen to zero for the first time, despite pressure over Xi Jinping’s flagship policy. What Happened: According to new data, Beijing signed no new deals with Russian entities under its Belt and Road Initiative in the first half of 2022, signaling Xi Jinping’s reluctance to incur sanctions amid the Ukraine war. The findings were part of a report by the Green Finance & Development Center at Fudan University in Shanghai, the Financial Times reported. This comes in stark contrast compared to the past multibillion-dollar pledges and contracts. According to AidData, official lending commitments from China to Russia between 2000 and 2017 totaled $125.4 billion. According to the director of the Green Finance & Development Center, Christoph Nedopil Wang, the threat of western-led sanctions could have deterred China from investing in Russia. He further added that the fall might be “only temporary,” adding that there is “definitely strong engagement between Russia and China.” He added that Chinese purchases of Russian energy exports have increased despite the war. The report showed that while China avoided investments in Russia, Jinping's government deepened its engagement with the Middle East. According to the data, Beijing signed $5.5 billion of new deals in Saudi Arabia in the first half of the year as it strengthened its ties with Middle Eastern states through massive energy and construction deals.
https://news.yahoo.com/russia-faces-economic-oblivion-western-135552799.html Russia faces 'economic oblivion' as Western sanctions continue to eat away at GDP, new study says Phil Rosen Tue, July 26, 2022, 3:55 PM·2 min read A new study looked into the severe hit being absorbed by Russian GDP amid wartime sanctions from the West. Businesses are leaving Russia in droves, and foreign companies that have left previously accounted for 40% of GDP, the authors wrote. "There is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure." Western sanctions are weighing on the Russian economy as the war in Ukraine enters its fifth month, and the country's sinking GDP makes a full economic recovery difficult to envision, according to a new study by Yale academics including Jeffrey Sonnenfeld. The exodus of over 1,000 global companies from Russia has severely damaged its economy, the authors argue, and any posturing of strength or resilience by Moscow is not an accurate reflection of what's actually going on. Official data coming out of Russia are not true, they said. "From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy," the authors wrote. Forty percent of Russia's GDP is now gone thanks to foreign companies leaving Russia, and almost none of them are set to return soon. That represents a reversal of roughly three decades' worth of foreign investment and capital. Russia so far has published statistics that suggest strong oil and gas revenues have been able to stave off the drag of sanctions, though the study says otherwise. The Kremlin has had to rely on unsustainable and artifical capital controls to smooth over the economic weaknesses, the authors said. "Russian domestic production has come to a complete standstill," the authors said, adding that Russian imports have "largely collapsed." Meanwhile, Russia has been increasingly cutting off the tap for European natural gas via the Nord Stream 1 pipeline. But, according to the study, Russia needs Europe as an energy customer to a greater degree than Europe needs Russian natural gas. Ultimately, the warring nation has little hope for an economic recovery, the researchers said. In their words: "Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure." Read the original article on Business Insider