The sources of foreign currency inflows in the context of providing the exchange rate stability in Ukraine

Received: September 24, 2015
Accepted: September 24, 2015
Authors: 

S. Tkach

Yuri Fedkovich Chernivtsi National University

In terms of the balance of payments deficit and a deep devaluation of the hryvnia, the problem of expansion the existing sources of foreign currency inflows in Ukraine's economy has become relevant. Permanent excess of demand over supply of foreign currency in the domestic currency market in recent years has necessitated additional financial resources from abroad. In addition, revenues and effective use of foreign currency is not only essential for stabilizing the financial sector in the state, but is also a catalyst of market transformations in society, a prerequisite for innovation and development of socio-economic sphere in general.

The purpose of this paper is to analyze the main sources of foreign currency inflows in the context of exchange rate stability in Ukraine. The study determined that the largest sources of foreign currency inflows in Ukraine are earnings from exports of goods and services, external loans, foreign investment, factor income from abroad and currency transfers. The analysis showed that over the past ten years the volume of receipts from the mentioned sources tended to increase. The exception is the crisis years, when, on the contrary, there was reduction in the flow of financial resources from abroad.
The paper presents comparative analysis of selected indicators characterizing the extent of foreign currency inflows in Ukraine and other countries. It was determined that Ukraine, according to these indicators per capita, is significantly behind not only of developed markets, but also of the countries with transition economies. The problem is exacerbated by the fact that in a compicated political situation in Ukraine, attracting foreign capital from abroad is becoming significantly more difficult.  

The author demonstrated the impact of foreign currency earnings for the country's balance of payments and exchange rate dynamics of the national currency. During the research of the main sources of foreign currency inflows, the dynamics of the gross external debt of Ukraine has been also analyzed. It was determined that its growth is due to the unbalanced state budget, the deficit of the trade balance and imbalance of the domestic currency market. In addition, the devaluation of the hryvnia has led to a rapid increase in gross external debt to GDP ratio and, consequently, exceeding a safe threshold.
In a sharp reduction in foreign investment inflows, factor income and current transfers automatically transformed into one of the largest sources of foreign currency earnings to the country. Research has shown that Ukraine receives about 80% of revenues in these channels from immigrants as payment for their work. Unlike investment resources, remittances are least dependent on critical processes and have a clear counter-cyclical nature of formation and functioning.

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