UPDATE 3-Ukraine’s central bank to lift benchmark rate to 30 pct


* Highest interest rate in 15 years takes effect Wednesday

* C.bank cites inflationary threat after currency tumbles

* Importers buying dollars facing tougher controls

(Adds overnight rate hike)

By Natalia Zinets

KYIV, March 3 (Reuters) – Ukraine’s central bank will raise
its benchmark refinancing rate to 30 percent from 19.5 percent,
the head of the central bank said on Tuesday, seeking to rein in
rocketing inflation and stem persistent currency weakness.

The hryvnia has halved in value so far in 2015 after
shedding 50 percent last year. Last week it hit record lows of
below 30 to the dollar after political upheaval and conflict
pushed the ex-Soviet republic to the brink of bankruptcy.

The new interest rate, which takes effect on Wednesday, is
the highest for 15 years and will inflict further pain on an
economy expected to shrink by 5.5 percent this year. The
government sees inflation at 26 percent in 2015, though Prime
Minister Arseny Yatseniuk has said that may be “too optimistic”.

Kyiv, battling an insurgency by pro-Russian separatists in
eastern Ukraine, hopes a $17.5 billion bailout package from the
International Monetary Fund will help stabilise the economy.

The hryvnia’s average rate firmed to 26.594 against the
dollar at 1700 local time (1500 GMT) from a level of 28.998
earlier in the day, based on banks’ trades registered with the
central bank.

Traders say demand on the market is low and that some of the
currency’s firming since last week is due to tougher controls
put on importers who wish to buy dollars.

Explaining the rate hike at a news briefing, central bank
chief Valeriia Gontareva said the bank believed “the threat of
inflation had risen strongly due to negative consequences from
currency market panic”.

The bank will also extend a rule obliging companies to sell
75 percent of their foreign currency earnings, among other
measures to help stabilise the hryvnia, which Gontareva said she
hoped would return to a level of 20-22 to the dollar “quickly”.

Exchange booths in Kyiv were buying dollars at 24 hryvnia to
the dollar and selling dollars at 29 to the hryvnia.

The bank intervened in the currency market on Tuesday for
the second time this week, buying dollars at a rate of 24.8207.
The bank had bought dollars at a rate of 26.8581 on Monday.

In line with the decision to raise the key refinancing rate,
the central bank also announced a 10 percentage point rise in
its overnight rate to 33 percent from 23 percent, effective on
Wednesday.

“TAILSPIN”

Ukraine’s parliament passed a raft of amendments, including
pension cuts and tax hikes, to a 2015 budget draft late on
Monday. Kyiv hopes this will help clinch the loan package when
the IMF’s executive board meets on March 11. {ID:nL5N0W4500]

“It is obvious that the economy is in a tailspin and Ukraine
needs the IMF support urgently, and they are resorting to all
sorts of emergency measures to stabilise the currency at all
costs,” said Tatiana Orlova, a senior economist at RBS.

“I hope there will be a clause … to support the banking
sector because the recapitalisation of the banks will be
required in any case.”

Separately, the bank declared Ukraine’s fourth-largest Delta
Bank insolvent after Gontareva said it had adopted risky
policies during a period of economic turmoil.

Delta’s insolvency is due to a “failure to take timely,
effective and sufficient measures to improve the finances of the
bank”, the central bank said.

No one from Delta was immediately available for comment.

(Additional reporting by Alessandra Prentice and Karin
Strohecker in London; Writing by Alessandra Prentice and Thomas
Grove; Editing by Mark Heinrich)