Will Ukraine abandon the hryvnia and switch to the euro? Will money in the country be changed because of the EU?

Ukraine's eventual membership in the European Union (EU) will not lead to an immediate replacement of the hryvnia with the euro. After all, in order to be able to manage its budget, revenues and expenditures, the country needs to have its own currency.

This was stated by financial analyst Andriy Shevchyshyn, according to Channel 24. He noted: "It will take at least 10-15 years."

The expert emphasized that the Eurozone has very strict rules for emission policy and other aspects. Accordingly, it will be important for Ukraine to have independence - at least at the beginning.

"I believe that now is the time for Ukraine to implement its own currency policy. This is especially important for recovery, stimulation of exports and imports, and the formation of its own industrial, agricultural, and industrial policy. And it is very important to have our own currency in order to regulate export and import flows and form some kind of protectionist policy," Shevchyshyn explained.

Not all EU countries use the euro

For his part, economist Yaroslav Zhalilo reminded that a large number of Ukraine's neighboring countries (for example, Poland, the Czech Republic, and Hungary) have not yet switched to the euro. According to him, this is due to the fact that they want to have sovereignty in monetary policy, "and this is only possible if they have their own currency."

"Plus, there are various transition periods. That is, let's say, for Ukraine it is more important to have such transition periods, so we are not saying that membership will be equal to the introduction of the euro," he said.

Moreover, according to the article, Ukraine has not even declared plans to abandon its own currency in favor of the euro. Even if it joins the EU.

Why Ukraine is talking about switching to the euro

Earlier, analysts at the Ministry of Finance noted that despite the National Bank's intentions to untie the hryvnia from the dollar and start calculating its exchange rate against the euro, there are no plans to switch to the euro. Neither in the near nor in the distant future. This is because, among other things, Ukraine would lose the ability to conduct its own interest rate policy. In addition, the abandonment of the hryvnia will make it impossible to implement an independent exchange rate policy.

It is also noted that there is still no consensus on how effective such a step is for countries with unstable democracies and underdeveloped markets. This includes Ukraine.

"Crises [in such countries] often have an internal political nature. And the standard method of absorbing currency and financial shocks caused by a crisis is to devalue the national currency, which cannot be done after joining the euro zone," the authors explain.

At the same time, they emphasize that the ability to change the exchange rate of the national currency should help the Ukrainian economy to adapt to shocks and changes in the phases of the business cycle. And while the hryvnia can fulfill this task by "responding to changes in the balance of supply and demand in the foreign exchange market,"

• the euro, it is argued, often changes in the wrong direction, which corresponds to the situation in the Ukrainian economy;
• "This can lead to the accumulation of macroeconomic imbalances, as well as generate crises and hinder economic growth."

"Ukraine's transition to the euro is definitely not the right time. Ukraine should retain the flexibility of its monetary policy to ensure the normal functioning of the economy. In principle, in our country, a significant part of GDP is redistributed through budget expenditures, and, accordingly, its own currency helps to create mechanisms of rapid money circulation more easily," the article states.

As OBOZ.UA previously reported, despite the fact that the hryvnia will be under devaluation pressure in the near future, Ukraine is not expected to see any sharp changes in the dollar exchange rate by the end of 2024. The fact is that after the agreement in principle with creditors on the restructuring of the state debt, the specter of default has disappeared, and in general, Ukraine retains broad financial support from its partners.

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