The Council of the National Bank of Ukraine held a scheduled meeting on 21 February 2013.

The Council of the National Bank of Ukraine adopted the decision regarding the status of implementation of the monetary policy in 2012 and its effect on the social and economic development of Ukraine and evaluated the efforts made by the Board of the National Bank of Ukraine to implement the Main Principles of the Monetary Policy for 2012. In accordance with this Decision, the Council of the National Bank of Ukraine reviewed information from the Board of the National Bank of Ukraine regarding fulfillment of the Main Principles of the Monetary Policy and acknowledged that the implementation of the monetary policy in 2012 enabled the National Bank of Ukraine to exercise its main function – ensuring stability of the monetary unit of Ukraine.

“The efforts by the Board of the National Bank of Ukraine were in line with the Main Principles of the Monetary Policy for 2012. The monetary measures taken by the National Bank of Ukraine when pursuing the monetary policy of Ukraine were in line with the macroeconomic developments and met the goals and objectives of the monetary policy for 2012,” reads the statement released by the Council of the National Bank of Ukraine.

The Council of the National Bank of Ukraine believes that the unfavorable external environment had a bearing on the Ukrainian economy in 2012. Under the current global economic downturn, weaker demand and lower prices for Ukraine's exports had implications for the balance of payments and development of the real economy sector. In addition, in 2012, Ukraine made considerable payments to repay public debt and state-guaranteed debt, which had exceeded more than twice payments made in 2011.

“Under such conditions, the National Bank of Ukraine kept inflation low – in 2012, the consumer price index had grown by “minus” 0.2%. Price stability achieved and maintained in 2012 contributed to the growth in households' real income, helped preserve value of individual savings and boost pricing advantage of Ukrainian manufactures on foreign and domestic markets,” reads the decision of the Council of the National Bank of Ukraine.

Stable, predictable situation on the foreign exchange market helped maintain price stability. In 2012, the hryvnia exchange rate for cashless transactions had dropped by 0.29% to UAH/USD 8.052. In the cash segment of the foreign exchange market, during the same period hryvnia had lost 0.28% in the transactions involving sale of US dollars to the public, valued at UAH/USD 8.088.

The Council of the National Bank of Ukraine pointed out that dynamics of the money supply were in line with the macroeconomic situation. In particular, the monetary base had expanded by 6.4% in 2012. As a result, the money supply had climbed by 12.8%.  The measures aimed at development and strengthening of the banking system resilience helped further expansion of the banks’ resource base. In 2012, individual deposits had increased by 19.0%.

“In 2012, the National Bank of Ukraine took a set of measures aimed at stimulating bank lending activity. In particular, the discount rate and rates on refinancing loans to banks were lowered; liquidity-providing transactions involving the provision of refinancing loans to banks and purchase of securities were actively carried out; more flexible requirements to banks’ provisioning were established,” reads the decision of the Council of the National Bank of Ukraine.

However, given existence of substantial external risks and uncertainty surrounding further market developments, banks resumed their lending activities at a moderate pace – in 2012 amount of bank financing provided to the real sector of the economy grew by 4.9%.

At its meeting the Council of the National Bank of Ukraine provided a number of recommendations to the Board of the National Bank of Ukraine. In particular, it called on the Board of the National Bank of Ukraine to introduce greater flexibility in the use of monetary mechanisms and tools given the need to provide more efficient support to the economic policy of the Cabinet of Ministers of Ukraine aimed at economic growth provided that its actions related thereto of the do not create risks to the attainment of its goals of price stability. The Council of the National Bank of Ukraine suggested that the Board of the National Bank of Ukraine should promote the introduction of new financial instruments into circulation, including those in the form of electronic documents by providing methodological and organizational support if required. In order to make cashless payments more efficient and reduce the amount of cash outside banks, the Council of the National Bank of Ukraine considers it expedient that the Board of the National Bank of Ukraine should take measures to upgrade the National System of Mass Electronic Payments to enhance its ability to handle cross-border transactions involving the international payment systems and promote a smooth exchange of information between the banks and government bodies.

The Council of the National Bank of Ukraine has recommended that the Cabinet of Ministers of Ukraine should develop a structural economic reform strategy, with top priority accorded to the promotion of industries that have the potential to produce globally competitive products in the long run and appear to be the least vulnerable to the external shocks. In addition, the Cabinet of Ministers of Ukraine should foster resumption of the Stand-By program with the International Monetary Fund and raise funds from other global institutions (World Bank, EU). The Cabinet of Ministers of Ukraine should also ensure economic entities' unconditional adherence to the legal norms with regard to setting prices for goods, tariffs and services (including advertisements) exclusively in the domestic currency of Ukraine.

In order to boost agricultural production as one of the key factors behind the improvement in the balance of payments, the Council of the National Bank of Ukraine considered it necessary that the Cabinet of Ministers of Ukraine should take measures to establish a collateral framework that will allow grain to be used as collateral for agreements by introducing a new form of a warehouse document – an electronic grain warehouse receipt that has to achieve full convergence with financial instruments.

The next meeting of the Council of the National Bank of Ukraine is scheduled for April 2013.