The Council of the National Bank of Ukraine held a scheduled meeting on 25 April 2013, which covered the following issues:  the status of implementation of the monetary policy in January – March 2013 and its effect on the social and economic development of Ukraine; consideration of the auditor’s opinion and approval of the annual financial statements of the National Bank of Ukraine for 2012; approval of the Annual Report of the National Bank of Ukraine for 2012 and approval of report on utilization of the budget of income and expenditures of the National Bank as well as income distribution before the income distribution for 2012.

Regarding the conduct of the monetary policy in January – March 2013 and its effect on the social and economic development of Ukraine, the Council of the National Bank of Ukraine has acknowledged that the implementation of the monetary policy in January – March 2013 enabled the National Bank of Ukraine to fulfill its main constitutional function of  ensuring stability of the monetary unit of Ukraine,  foster the banking system stability and support the economic policy of the Cabinet of Ministers of Ukraine.

The Council of the National Bank of Ukraine has concluded that the monetary policy measures taken by the National Bank of Ukraine proved to be an adequate response to the processes occurring at the macroeconomic level and met the goals and objectives of the monetary policy for 2013. In particular, they served to underpin positive trends that emerged in the monetary sphere at the end of 2012, including those in the dynamics and structure of liquidity, banks’ resource base and cost of funds.

According to estimates by the Council of the National Bank of Ukraine, in the first quarter of 2013 the Ukrainian economy enjoyed low inflation: in March, the Consumer Price Index grew by 0.1% as compared  with  December 2012 (the year-on-year Consumer Price Index grew by “minus” 0.8%).

The Council of the National Bank of Ukraine points out that the first quarter of 2013 saw certain positive developments in the economy, primarily in the external sector. In January-February 2013, the overall balance of payments showed a surplus of USD 1.7 billion (in the respective period of 2012 – deficit of USD 0.9 billion), which led to an increase of 0.7% in the stock of international reserves. As of 1 April 2013, the amount of international reserves was the equivalent of USD 24.7 billion.

The Council of the National Bank of Ukraine believes that situation on the foreign exchange market remained predictable. In January– March 2013, the hryvnia-to-US dollar exchange rate on the interbank foreign exchange market decreased by 0.56% to 8.0974UAH/USD. Dynamics of the money supply were in line with the macroeconomic situation. In the first quarter of 2013, the monetary base increased by 0.3%, whereas the money supply expanded by 3.6%.

“The stability of the national currency helped enhance the confidence of economic agents therein. In the first quarter of 2013, the deposit growth (4.3%) was driven by an increase of 8.1% in national currency deposits. In contrast, deposits in the foreign currency declined by 0.6%.The expansion of banks’ resource base had a positive impact on the liquidity position of banks. It exerted downward pressure on the cost of funds, with the average weighted interest on loans in the national currency having declined from 17.6% to 15.9%. In the first quarter of 2013, the growth of loans to the real sector of the economy made 1.7% versus 0.6% in the respective period of 2012,” reads the decision of the Council of the National Bank of Ukraine.

At the conclusion of the meeting, the Council of the National Bank of Ukraine recommended that the Board of the National Bank of Ukraine should continue to focus its efforts on improving interest rate money market regulation mechanisms, developing and implementing additional measures aimed at maintaining economic growth. In order to streamline cash settlements and reduce the amount of cash outside banks, it is recommended that the National Bank of Ukraine take measures to impose a cap (upper limit) on the amount of cash settlements between enterprises (entrepreneurs) and natural persons, as well as on the amount of settlements in cash between natural persons under purchase and sales agreements subject to notarization.

Having considered the auditor’s report issued by Ernst & Young Audit Services LLC on the consolidated financial statements of the National Bank of Ukraine as at 31 December 2012, the Council of the National Bank of Ukraine approved the consolidated financial statements of the National Bank of Ukraine as at 31 December 2012.

The Council of the National Bank of Ukraine has also approved the Annual Report of the National Bank of Ukraine for 2012, report on utilization of the budget of income and expenditures of the National Bank as well as income distribution before the income distribution for 2012.

The next meeting of the Council of the National Bank of Ukraine is scheduled for September 2012.