Ambassadors from the G7 countries, IMF staff and NBU Board members met to discuss the current situation in Ukraine’s economy and banking sector, as well as the possible impact of recent high-profile court decisions involving the NBU on the country’s financial stability.
NBU Governor Yakiv Smolii opened the meeting by thanking all those present for their support and fruitful cooperation, and stressing the importance of the central bank retaining its independence.
“The main thing for the central bank is to implement its mandate to deliver price and financial stability,” Smolii said. “With that in mind, and with its institutional independence supported by its international partners, the NBU will continue to cooperate with all state institutions, guided by the principles of transparency and partnership.”
Turning to the current economic and banking system conditions in Ukraine, the governor said that the steady downward trend in inflation to its 5% target had enabled the NBU Board to commence a monetary policy easing cycle – on 26 April it cut the key policy rate to 17.5% per annum, which was the first cut in two years.
He also highlighted the main indicators of the banking system, noting its record profit in 2018 and positive profit expectations for 2019. The governor also said that with the support of its international partners, Ukraine has a good chance of painlessly going through the period of peak external public debt payments, and that it would maintain its international reserves at the current level of USD 20-21 billion.
The participants paid special attention to the NBU’s current priorities, and the risks that the central bank sees to financial system stability, including those arising from a number of ongoing litigations. The G7 ambassadors once again expressed concern about certain high-profile court decisions.
A significant portion of the meeting was devoted to discussing progress in carrying out financial market reform in Ukraine, as well as further planned steps.
The NBU continues to see its priorities to be safeguarding macroeconomic stability, meeting its inflation target, and cutting the key policy rate further to help decrease loan rates – as long as this does not threaten price stability.
The central bank will also focus on further liberalization of the FX market, corporate governance reforms at state banks, dealing with large volumes of non-performing loans on the banks’ balance sheets, and dividing the functions of the National Commission for the State Regulation of Financial Services Markets between the NBU and the National Commission for Securities and the Stock Market.
NBU Deputy Governor Dmytro Sologub said that Ukraine had achieved macroeconomic stabilization and that it was high time the country started working to support the sustainable development of its financial markets. However, this is a task not only for the NBU, but also for all government agencies that regulate the country’s financial markets.
The participants also congratulated the NBU on winning the transparency award, a central banking award, for the significant progress it has achieved in developing a dialogue with its stakeholders.