KIEV, Nov. 27 – U.S. dollars are expected to hit the cash market Friday following weeks of scarce supply as the National Bank of Ukraine is due to lift currency restrictions, a top NBU official said.

The NBU is supposed to eliminate its earlier ban on commercial banks’ quoting dollars and other hard currencies at exchange rates exceeding the official exchange rate by 1.5%.

Also, the NBU is due to unify the official exchange rate and the rate quoted in daily transactions in trading between commercial banks, a move that is expected to get the official rate closer to market level.

“I think that tomorrow hard currency will appear in exchange kiosks,” Oleksandr Savchenko, deputy governor of the NBU, told reporters at an economic conference in Kiev. “We lifted all the restrictions, so it should emerge tomorrow.”

For the past several weeks it has been virtually impossible to buy U.S. dollars and other hard currencies such as euros in Ukraine as a financial crisis and growing panic have been sweeping the country.

The problem was so sharp that Naftogaz Ukrayiny, the national oil and gas company, was not able to buy $100 million on the interbank market on Tuesday.

Naftogaz was making frantic attempts to buy dollars, including talking directly to the NBU, as the company needs the hard currency to start paying $2.4 billion gas debt to avoid a gas supply cutoffs by Russian gas giant Gazprom.

The NBU, which has been massively spending its forex reserves to support the hryvnia, the local currency, stopped the practice last week amid concerns that its reserves have been falling sharply.

The development underscores a significant downward pressure on the hryvnia as Ukraine experiences impact of the world credit crunch, which has slowed world’s economic growth reducing demand for steel and fertilizers, Ukraine’s main exports.

Meanwhile, the hryvnia continued its freefall against the U.S. dollar on Thursday as the NBU had failed to spend its forex reserves to support the local currency.

The hryvnia was closed at 7.30 to the dollar on Thursday, compared with 6.95 to the dollar on Wednesday, suggesting the downward pressure persists, dealers said.

The hryvnia’s spectacular depreciation against the dollar, by about 50% over the past two months, is expected to benefit exporters and will discourage imports that are expected to improve Ukraine’s foreign trade balance.

“The fuel prices will drop, the exchange rate will rise [hryvnia will lose value] and all this will lead to a zero or very small current account deficit at about 1-2% of the GDP,” Savchenko said.

The change will be a marked improvement from $8.4 billion current account deficit that was reported by the NBU in January through September, a figure that has been putting major downward pressure on the hryvnia.

The NBU also does not expect any defaults in the banking sector and in Ukraine’s corporate sector and credits the stability to the high share of foreign banking capital in Ukraine.

Major western banks, from Commerzbank of Germany to Banca Intesa of Italy, have been buying banking assets in Ukraine over the past three years, increasing the share of the foreign banking capital to 50% in Ukraine.

“This is a very important factor of stability,” Savchenko said. “Taking ths factor into account, we can say that balance-wise Ukraine has no risk of default by major corporations, as well as by the state, at least during the next two-three years.”

Ukraine, including the government and corporations, is due to pay $5 billion in debts in 2008 and $30 billion in 2009, while the NBU is currently holding about $30 billion in forex reserves. The IMF recently approved a $16.4 billion emergency loan to Ukraine, of which $4.5 billion has already been disbursed. (tl/ez)