Exclusive Ukrainian business needs to ease existing currency restrictions

Due to the NBU's restrictions, large businesses do not have access to Western capital markets and cannot pay their creditors

The war has caused an almost endless number of problems for Ukrainian businesses – from damage and loss of assets to financial, logistical and human resources difficulties. In order to keep the economy afloat, the government began implementing measures to stabilize the financial system and tighten control over capital flows from the very first days. In the fourth year of the war, these restrictions, despite their partial liberalization, prevent large businesses from attracting the investments necessary for their own development and the country as a whole.

Problems of large companies

Currency restrictions are an important measure to support the national financial system and prevent excessive capital outflows, especially in times of war. Currently, they are being gradually eased, which is a really positive signal for most businesses.

For example, starting from September 10, 2024, a number of restrictions were eased on the purchase and transfer of foreign currency by e-commerce entities to pay VAT in the EU and to cover CO2 emissions, payments under reinsurance contracts and compensation for coupon payments on Eurobonds. Starting from May 10, 2025, Ukrainian companies will be able to carry out certain foreign exchange transactions in excess of the established restrictions within the investment limit. In addition, the opportunities for financing foreign representative offices and making payments for court proceedings have been expanded, limits on corporate card payments abroad have been increased, forward transactions have been allowed, etc.

“Yes, there are shorter time limits for the return of foreign currency proceeds/goods and more time is needed to administer currency control processes, but the list of possible cross-border currency transfers from Ukraine is gradually expanding,” Ivan Marynyuk, Head of Tax Practice at Ilyashev & Partners Law Firm, told GMK Center.

However, the issue of restrictions on foreign currency transactions is of great importance for exporters and companies with foreign investments, and in terms of business scale – for large and some medium-sized companies. According to Ivan Maryniuk, currency restrictions are an obstacle to attracting external financing for large businesses, as they do not understand how investments can be returned, and the established limit on dividend payments may not be enough.

EBA surveys show that currency restrictions have a significant impact on business. In particular, 81% of the surveyed companies believe that currency restrictions have a negative impact on the investment attractiveness of Ukraine. In addition, currency restrictions, along with improving the conditions for booking employees, a moratorium on inspections, and covering military risks, are among the issues that Ukrainian businesses name as requiring the most support from the state.

According to Viktoriia Burdeina, EBA Committee Manager, the following issues pose the greatest difficulties for business, according to surveys of EBA member companies:

1. The ban on paying dividends from profits accumulated before January 1, 2024 – many companies already had a significant amount of retained earnings at the start of the war, and these funds are still blocked. In addition, the current limit for paying “new” dividends is insufficient.
2. Restrictions on loan servicing, including the inability to repay “old” loans to non-residents (for those payments that are not currently allowed by the NBU) and to use Eurobond servicing instruments.

These problems are partially solved by the new mechanism of “stimulating currency liberalization.” It allows for the fulfillment of debt obligations under “old” external loans received before June 20, 2023, and payments for imports of goods delivered before February 23, 2021, but only within the limits of the new foreign capital raised.

According to Victoria Burdeina, there are still operational restrictions that hinder business:

• inability to pay for imported goods delivered before February 23, 2021 (outside the investment limit)
• restrictions on the purchase of foreign currency to fulfill obligations regardless of the company’s foreign currency funds;
• limited possibilities for offsetting counterparty obligations.

Due to the NBU’s restrictions, large businesses in the country do not have access to Western capital markets and cannot pay their creditors. As the entire Ukrainian economy is now facing a critical shortage of investment, this is no longer just a problem for large companies, but threatens the existence of the state in a time of war.

“We are facing this in our negotiations with international lenders. For example, we are planning to build a 50 MW solar power plant at our enterprises and have found an institution willing to provide financing. However, at the stage of discussing the financial model, the question arises: “Your limit is €1 million per month. How are you going to repay the €50 million investment?” Under such conditions, the return of funds becomes unrealistic,” says Oleksandr Vodoviz, Head of the Office of Metinvest Group’s CEO.

For your understanding, Metinvest’s loan portfolio is $2.5 billion. The problem of settlements with creditors was not resolved during several waves of easing currency regulations in 2024-2025. That is why large businesses hope that the National Bank will change its approach to setting currency restrictions and differentiate them depending on the size of the business to attract investment.

For small and medium-sized businesses, the €1 million per month limit may be sufficient, while currency restrictions may be insignificant due to the scale of their operations.

“The NBU does not include currency restrictions in its list of obstacles. It can be said that our survey and the NBU survey show that companies in wartime have more fundamental obstacles to doing business, so currency restrictions are not among the main ones,” Vitaliy Kravchuk, a leading researcher at the IER, said in a commentary to GMK Center.

Necessary changes

Currency restrictions prevent businesses from increasing economic and investment activity, which negatively affects the Ukrainian economy and state budget revenues in times of war. According to Viktoriya Burdeina, businesses are most in need of the following changes in currency payments

• liberalization of dividend payments, by raising the current limit (for example, to €3 million per month) and partially lifting the ban on dividend payments from profits by January 1, 2024, subject to the introduction of a certain combination of safeguards to prevent significant capital outflows;
• expanding credit servicing opportunities, in particular by expanding the ability to repay loans to non-residents and repay intra-group loan agreements in case of debt as of 24.02.2022. The ability to service Eurobonds will also significantly help the business to continue its operations with confidence;
• the possibility of completing currency supervision when offsetting counterparty obligations, permission to pay for imports of goods delivered before 02/23/2021 (outside the investment limit) and the ability to purchase foreign currency to fulfill obligations regardless of available funds will greatly help businesses to conduct their operations, fulfill contractual obligations and thus maintain their reputation as a reliable business partner;
• in order to overcome social and corporate challenges, businesses need to increase the limit for remittances of non-resident employees to their families to $15-20 thousand per month, and expand opportunities to pay for education (including student housing).

Currency restrictions do not create opportunities for non-residents to return investments to Ukraine. That is, a non-resident can invest in a project in Ukraine, but in case of withdrawal from the project, he or she will not be able to get the money back.

“What business needs most is to expand the list of permitted transactions with a gradual increase in the limits on investment and withdrawal of investments from Ukraine,” emphasizes Ivan Maryniuk.

Prospects for easing restrictions

Not only big business speaks about the need to ease currency restrictions. Recently, Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, stated that it is necessary to gradually adapt these restrictions to the needs of business.

“Currency restrictions cannot be lifted now because our balance of payments is negative. But I agree that the National Bank can set certain currency restrictions with a margin. And, perhaps, by increasing the risk, it can bring the restrictions closer to the needs of business. We also urge it to do so, without putting pressure on the regulator,” the MP emphasized.

At the same time, NBU Governor Andriy Pyshnyi has previously stated that the regulator will move towards currency liberalization. According to him, this will be a gradual, controlled process that will be consistent with macroeconomic stability and market expectations. Although the NBU understands the problems experienced by businesses due to the current limits on foreign currency transfers, it prefers a gradual lifting of restrictions for all rather than issuing individual permits.

In addition, the memorandum with the IMF stipulates that the NBU’s decisions to issue individual permits must be consistent with the Strategy and objectives of ensuring macroeconomic, financial, and external stability, and will be made in cases of exceptional importance to the state in wartime. But if there is a “political decision” Ukraine is able to “ignore” the IMF’s requirements.

On the other hand, the “point default” announced by Fitch and S&P in connection with the non-payment of $660 million in GDP warrants will not add to the opportunities for attracting capital to Ukraine. However, it will not get worse.

“The most important thing is that there is no cross-default on Ukraine’s other obligations. The foreign currency rating (FC) has been affirmed at ‘SD/SD’ only. The outlook on the long-term local currency sovereign rating of ‘CCC+’ is stable.” In principle, nothing critical. Private foreign markets for loans are closed for us until the end of the war,” summarizes financial analyst Oleksiy Kushch.