Ukraine to abandon the dollar in favor of the euro

Ukraine plans to peg the hryvnia exchange rate to the euro instead of the dollar. However, the transition to the new exchange rate will not be immediate, it will take several years (in the range of 5-10 years). Ordinary Ukrainians will not feel the difference at all, as the consequences of the innovation will be more reflected in business representatives.

The Novyny.LIVE agency spoke with Doctor of Economics Oleksii Plotnikov about why the NBU decided to replace the dollar with the euro and what it means for Ukrainians.

Why it is necessary to change the exchange rate currency

First Deputy Governor of the National Bank Kateryna Rozhkova spoke about this on the We Are Ukraine TV channel.  She noted that a full-scale war is not the best time to switch from the dollar to the euro, but in the long run, the change will take place, given Ukraine's course toward European integration.

According to Oleksii Plotnikov, historically, when the foreign exchange market weakened in the early 1990s, the US dollar became the first currency in Ukraine. Some countries used the German mark, and later switched to the euro. Logically, if we are moving into the EU, we should also switch to the European currency.

"How will this happen? Everything will go smoothly, in a working order, when the interbank market starts trading in euros instead of dollars. Accordingly, the NBU will set the official hryvnia exchange rate against the euro, and the dollar will be calculated as the ratio of the euro-dollar pair," the expert said.

He added that the transition will not be smooth, and certainly not within the next year or two. This is because we have to take into account the inertia and conservatism of our citizens who are used to the US currency.

At the same time, MP Bohdan Kitsak clarified on Ranok.LIVE: a full replacement will take place in 5-10 years, not earlier. This will be done by increasing the volume of transactions in euros, strengthening exports and imports, remittances from Ukrainians abroad, etc.

What will happen to dollar and euro exchange rates

The question is how this change will affect the exchange rate. According to Oleksii Plotnikov, the National Bank will set the official exchange rate of the hryvnia against the euro using the same formula it uses for the dollar, taking into account trading on the interbank market. The countdown will start on the basis of current indicators, and the dynamics will depend on external and internal factors.

"We are not going to predict the dynamics of the dollar-euro yet, because this is a matter of the EU economy, the decisions of the new US President Donald Trump, etc. Currently, there is almost parity (1:1), but there were times when the euro was cheaper than the dollar. It is possible that the US currency will strengthen after Trump's inauguration. There is no point in predicting the euro in such a long-term perspective," the economist stated.

At the same time, he added that nothing will change dramatically for ordinary Ukrainians. They will continue to use dollars as they are used to. But business will face changes, said MP Andrii Nikolaienko on Ranok.LIVE. After all, export and import operations will be carried out in euros, which could theoretically lead to a rise in the price of goods and services.

Should Ukrainians switch to the euro?

There is no need to change the currency of your savings. It is better to diversify capital and keep cash in different currencies. Oleksiy Plotnikov advised citizens not to bet specifically on the dollar or the euro, as there is always a risk of exchange rate fluctuations.

The basic rule of financial education is that the only right decision is to exchange money for different currencies in equal proportions. Part of the money should be kept in hryvnia to buy goods or pay for services as needed.

As a reminder, the dollar will rise to the level set out in the State Budget in 2025. It is possible that the rate will cross the UAH 45/USD mark and go higher.

We also wrote that the minimum wage remained at UAH 8,000. But it decreased in dollars, as the national currency depreciated. Consequently, the purchasing power of Ukrainians has decreased.