Starting from 8 March 2022, the NBU may support state budget through purchase of Ukrainian government securities in the primary market due to the need to finance the Armed Forces of Ukraine and for the duration of martial law.
At the same time, the NBU will only provide limited financing for the critical expenses of the government. This will allow to minimize the risks of high inflation and disrupting macrofinancial stability and will facilitate quick return to market-driven operation of economy and financial markets after the war.
With this in mind, on 8 March 2022 the NBU Board has decided to purchase war bonds for the amount of UAH 20 billion. This amount constitutes approximately 1.3% of the total amount of Ukraine’s state budget expenditures for 2022.
At the moment, the NBU is not a solo or even main sponsor of the government expenses. Despite the war, Ukrainian enterprises pay their taxes and large amounts are donated by people to support the Army. Our international partners also provide massive military, financial and humanitarian assistance.
The NBU will take a separate decision if the further financing of critical expenses is required. It will take into account the military situation, social and economic standing of Ukraine, situation in financial markets and public finances, as well as other sources of budget financing.
Lending to the government is a temporary measure taken by the NBU due to martial law. After the war is over and the economy is back to operating on market-driven principles, the NBU will return to its standard inflation-targeting regime with a floating exchange rate and will be reinstated the ban of financing the government.
The Verkhovna Rada of Ukraine has amended the laws in order to allow these transactions between the NBU and government. Namely, it has decided temporarily for the duration of martial law to waive Article 54 of the Law of Ukraine On the National Bank of Ukraine that prohibits the NBU from granting loans to the state.
In addition, the respective changes were described in NBU Board Resolution No. 43 On Purchase of Domestic Government Debt Securities (War Bonds) During Martial Law (UKR) that was adopted and came into effect on 8 March 2022.