Silent Devaluation: What’s Happening to the Hryvnia — and Who Really Controls the Exchange Rate

Following reports that the IMF is insisting on a hryvnia devaluation as part of negotiations for a new program worth roughly $8 billion (according to Bloomberg/Reuters estimates), the topic has entered the public domain.

The National Bank of Ukraine (NBU) denies any “IMF-driven devaluation,” citing inflation and social risks. Yet the actual exchange-rate dynamics indicate a gradual adjustment:

• On 1 October 2025, the official USD/UAH rate stood at ₴41.1420 (NBU).• On 20 October 2025, it was ₴41.7308 (NBU).

That means a depreciation of ₴0.5888 in three weeks — about 1.43%.

Exchange Rate = Budget: Why It Matters

Official fiscal documents and analytical briefs prepared for the 2025 state budget assume an average annual rate of ₴45 per USD (macro-framework of the Ministry of Economy/Cabinet of Ministers; cited in KSE and UNICEF reports).

Thus, as of 20 October, the official rate was about 7.3–8.6% stronger than the budget anchor (depending on whether one compares ₴41.1420 or ₴41.7308 with ₴45).

Moreover, official projections estimate the 2025 budget deficit at around ₴1.6 trillion, or roughly 19–20% of GDP.

Why Maintaining an Artificially Stable Rate Is Risky

From a professional standpoint, it is clear — and repeatedly emphasized— that “managed flexibility” no longer benefits the economy. The IMF is now pointing to the same conclusion.

The longer the central bank keeps the nominal exchange rate below the level implied by fiscal and external-trade fundamentals, the sharper the correction will be once adjustment becomes unavoidable. This is not only an economic but also a psychological process:

• businesses and households anticipate the shift (by moving into FX and repricing goods),• expectations become self-reinforcing.

Managing expectations is one of the key functions of a central bank. Transparent communication regarding the policy framework — budget assumptions, balance-of-payments position, and intervention parameters — helps reduce the amplitude of the future correction.

This is explicitly noted in the NBU’s regular macroeconomic reports (Monetary Policy Review / Inflation Report), where the exchange rate is analyzed in conjunction with inflation, the fiscal gap, and external-financing inflows.

“It’s Not Us — It’s the IMF”: Political Messaging Instead of Clear Signals

Before painful adjustments, a familiar narrative usually emerges:

“The IMF is demanding devaluation — we are forced to comply.”

Bloomberg and Reuters indeed report that the IMF favors a controlled weakening of the hryvnia as a tool of fiscal stabilization, with program details (including the ~$8 billion envelope) under discussion.

However, the Fund does not set an exchange-rate target. It merely requires a realistic macro-framework — and it is the Ukrainian government that agrees to those parameters by embedding them in the budget (for example, ₴45 per USD).

Thus, the “IMF as a big bad uncle” is more of a mirror reflecting Ukraine’s domestic imbalances — budget deficit, import-export structure, and dependence on external financing — rather than a conductor “assigning” the exchange rate.