You're reading: Low inflation strengthens Ukraine’s financial stability, says advisor to NBU governor

The decrease in inflation registered in the first five months of 2012 to 0.4% signals an increase in Ukrainian citizens' purchasing capacity, which will let the state back up the economy amid declining demand on foreign markets, according to Valeriy Lytvytsky, the head of a group of advisors to the governor of the National Bank of Ukraine.

"This is one of the fundamental conditions for reducing loan costs and invigorating investment," he said in an interview with Interfax-Ukraine.

He also stressed that the low inflation means the lack of devaluation risks.

"This should be considered by those on the foreign markets who look into twenty-two rather than two months ahead," he said.

According to Lytvytsky, the balance of the central bank’s interventions in May was almost balanced (foreign currency sales were equal to purchases), and the forex reserves were within $30-31 million, as was the case early this year, which is almost enough to prop up forex stability.

"The low inflation span will keep and strengthen the trend of the devaluation of the real efficient exchange rate, which is needed to safeguard domestic exports," he said.