The Euro and Dollar's Prospects in Ukraine
Former National Bank of Ukraine (NBU) expert Vitaliy Shapran has shared his perspective on the future roles of the euro and the U.S. dollar in the country. He acknowledged the euro's potential for growth but argued that replacing the dollar as the anchor currency is impractical. Shapran explained that Ukraine's market has long been dollarized, and a full transition to the euro would require 5 to 10 years. This is largely because the bulk of the country's raw material exports and a significant portion of its energy imports remain tied to dollar-denominated markets.
Vitaliy Shapran, who previously served as the chief monetary policy expert in the Secretariat of the NBU Council and was a member of the NBU Council, also emphasized that despite the ongoing war, the hryvnia will remain an attractive savings instrument in 2025. He stated:
'In all other cases, the dollar will remain the world's number one currency for trade, and as long as the war continues in Europe, its position in trade will only strengthen.' Vitaliy Shapran
Debating a Shift to the Euro
Shapran believes the question of adopting the euro requires thorough discussion. 'Undoubtedly, the euro has a great future in Ukraine. But I perceive talk of replacing the anchor currency with the euro as madness,' he added. Should a political decision be made to switch, the expert believes conditions must be created for it over a 5-10 year period.
He further recommended consulting with grain traders and metallurgists to gauge their readiness to switch to the euro, as such a move could cause them significant inconvenience. 'As we move away from a raw material-based export structure, we will increase the popularity of the euro in settlements,' Shapran stressed.
For now, the current situation means that with the dollar as the anchor currency, its depreciation against the euro makes Ukrainian products cheaper and more competitive within the Eurozone.
Shapran's comments highlight the complexities of a currency transition amid Ukraine's current economic challenges. The nation's deep integration into global dollar-based trade means any shift would be a monumental, long-term undertaking. While the euro offers potential benefits, its adoption would require navigating significant structural dependencies and market realities.