Ukraine is beginning to consider the possibility of abandoning the US dollar and more closely linking its currency to the euro amid the situation in global trade and growing ties with Europe, reported to Reuters by Central Bank head Andriy Pyshny.
Potential accession to the European Union, "the increased role of the EU in ensuring our defense capability, increased volatility in global markets, and the likelihood of fragmentation of global trade" are prompting the Central Bank to reconsider whether the euro should be the base currency for the Ukrainian hryvnia instead of the dollar, Pyshny said.
According to the head of the Central Bank of Ukraine, transactions with the US dollar continue to dominate in all segments of the currency market, but the share of euro transactions is growing in most segments, although "so far moderately."
Ukraine introduced the hryvnia in 1996 and has used the dollar as the base currency for decades.
The dollar dominates international trade and makes up a large portion of global reserves. However, under President Donald Trump, the US initiated a trade war, imposing possibly the highest tariffs in a century, causing some observers to question the future role of the dollar as a global reserve currency. Since Trump's return to the White House, the US dollar has fallen by more than 9% against a basket of major currencies, as investors shy away from holding American assets.
The decision was also influenced by the change in the US attitude towards the war in Ukraine, which has been ongoing for four years, with Trump temporarily halting military aid to Ukraine. Meanwhile, Ukraine has entered into an agreement granting the United States preferential access to new Ukrainian mineral extraction deals and funding investments in the country's recovery.
Ukraine relies on external financing to help fund military operations. According to Pyshny, he expects Ukraine to receive $55 billion this year, which will not only cover the budget deficit but also be used to create a reserve of public finances for the coming years when aid volumes are likely to begin decreasing.
"According to our forecasts, Ukraine will receive about $17 billion in 2026 and $15 billion in 2027," said Pyshny.