On 8 November, the Council of the National Bank of Ukraine held a scheduled meeting which reviewed information from the Board of the National Bank of Ukraine regarding fulfillment of the Monetary Policy Fundamentals in January – September 2012 as part of discussion of the ‘Status Update on the Implementation of Monetary Policy in January – September 2012 and its Effect on Ukraine’s Economic and Social Development’. The Council of the National Bank of Ukraine has acknowledged that the monetary policy pursued by the National Bank of Ukraine in January – September 2012 ensured the adequacy of the monetary policy measures taken to address the macroeconomic developments and met the goals and objectives of the monetary policy for 2012 and secured the fulfillment of the main constitutional function of the National Bank of Ukraine: ensuring stability of Ukrainian currency.
‘Despite the unfavorable external macroeconomic situation under conditions of declining demand and prices for traditional products of Ukrainian export, in January – September 2012 the National Bank of Ukraine has ensured stability of the national currency. The situation on the foreign exchange market remained predictable,’ Ihor Prasolov, Chairman of the Council of the National Bank of Ukraine said at the conclusion of the meeting. According to Mr. Prasolov, thanks to the National Bank’s prudent monetary policy a low-inflation environment was maintained in Ukrainian economy: the consumer price index remained 0% in annual terms.
The Council of the National Bank of Ukraine believes that stability of the national currency and implementation of measures aimed at development and strengthening of the banking system resilience helped further expansion of resource base of Ukrainian banks. In particular, during January – September 2012 household deposits have grown by 14.0%. At the same time, mostly due to existence of substantial outside risks and uncertainty surrounding further development of market situation, lending activity in Ukraine remained quite low: during the first nine months of 2012, outstanding loan amounts have increased by mere 1.2%.
The Council of the National Bank of Ukraine has also approved a list of recommendations to the Board of the National Bank of Ukraine and the Cabinet of Ministers of Ukraine.
The Council of the National Bank of Ukraine has recommended the Board of the National Bank of Ukraine to:
- regard as acceptable, bearing in mind that actual dynamics of the key macroeconomic indicators are different from the official forecasted benchmarks, a possible downward deviation of the monetary base growth vs the forecasted benchmarks set out in the Monetary Policy Fundamentals for 2012 when regulating the amount of money supply in 4Q 2012;
- provide liquidity support to the banks involved in government securities sale operations with Naftogaz of Ukraine NJSC pursuant to Resolution of the Cabinet of Ministers of Ukraine No 794-r of 17.10.2012 Certain Aspects of Activity of Naftogaz of Ukraine National Joint-Stock Company by using existing monetary instruments and mechanisms (refinancing, repo operations, purchase and sale of government securities) in order to promote sustainability of the economic growth and second the economic policy of the Cabinet of Ministers of Ukraine by maintaining pre-approved price stability and monetary base growth indicators;
- initiate the establishment of the Clearing Center for Servicing of Agreements on Financial Markets (in accordance with the Law of Ukraine On Depositary System in Ukraine) on the basis of All-Ukrainian Securities Depository PrJSC to foster development of stock market and ensure trouble-free debt settlements using financial instruments.
The Council of the National Bank of Ukraine has recommended the Cabinet of Ministers of Ukraine to:
- foster resumption of the Stand-By program with the International Monetary Fund and raise funds from other global institutions (World Bank, EU);
- take measures to immediately eliminate macroeconomic disproportions occurring as a result of preservation of certain administratively-regulated prices and tariffs at economically-unjustifiable level;
- take into account, when developing a draft state budget for 2013, the need to:
- use substantiated forecasted macroeconomic indicators when calculating budget parameters;
- ensure low level of budget deficit and strengthen its investment orientation;
- re-orientate the programs of budget support of priority industries toward predominant use of the mechanism of partial compensation of interest rates from the budget with appropriate minimization of such forms of support as non-repayable financial assistance (subsides, etc.), budget financing, and government guarantees;
- issue state treasury bonds for the public to diversity the sources of financing of budget deficit.
At the close of the meeting the Council of the National Bank of Ukraine has approved the Action Plan of the Council of the National Bank of Ukraine for 2013.