Ukraine's central bank has asked parliament to give it the right to introduce mandatory foreign currency sales, a measure not used since 2005, the bank said on Thursday. Mandatory forex sales - rules that require exporters and other foreign currency earners to convert at least a part of their revenue into local currency - have often been used by emerging market central banks in crisis situations.
By increasing foreign currency supply, they ease the pressure on local currency and help the central bank maintain its reserves. Ukrainian laws have barred such measures since 2005 but the central bank has drafted a set of amendments that would once again give it such powers and submitted them to parliament. "In a situation where negative external factors affect economic processes in Ukraine, the central bank should always have a set of flexible tools allowing it to introduce certain requirements for foreign currency operations," the bank said in a statement published on parliament website.
"According to the International Monetary Fund, there is a high risk of the emergence of a new crisis that can spread both to developed economies and emerging markets." The central bank's reserves fell to $29.3 billion as of June 30, 2012 from $34.6 billion at the start of 2011 as it intervened regularly to keep the hryvnia pegged at about 8 per dollar. Analysts say the bank may introduce greater exchange rate flexibility or readjust the peg after the parliamentary elections in October.
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