NBU reserves reached a record $49.5 billion: how will this affect exchange rates and inflation

First Deputy Chairman of the National Bank of Ukraine Sergiy Nikolaychuk participated in the podcast 'What is happening with the economy?' from the Center for Economic Strategy and Public Radio. They discussed the full-scale war, the current account deficit of the balance of payments, international reserves, IMF intervention in exchange rate policy, and inflation targeting.

According to the discussion, the widening trade deficit arose due to an increase in imports, especially in the defense sector. Ukraine received more than $160 billion for budget needs from international partners. The NBU expects international reserves to grow to nearly $60 billion by the end of 2027.

'A country in wartime cannot produce as many goods and services as it consumes. Someone has to finance this. It can happen either at the expense of accumulated buffers or with additional resources,' noted Sergiy Nikolaychuk.

The National Bank of Ukraine has the opportunity to accumulate international reserves thanks to its exchange rate policy, which allows reducing the demand for currency assets from the population and businesses. The main goal of the NBU remains to ensure price stability, including achieving an inflation target of 5%.

'In July, we were forced to revise our assumptions regarding the duration of high security risks. At that time, we revised the time required to bring inflation to the target of 5%,' said Sergiy Nikolaychuk.

The Deputy Chairman of the NBU expressed his opinion on the impact of the war on the country's economy and the need for effective financial management in the context of the conflict.