Ukrainian economy shrank by 7.5 percent this year, which is a 0.5-percentage point more pessimistic figure than the forecast, said the National Bank governor Valeriya Gontareva during the Dec. 30 news conference.
Inflation
this year is reaching 24 percent, she added, while the next year consumer
prices will grow by some 17-18 percent.
Hryvnia devaluation
Commenting
hryvnia’s 50 percent devaluation this year, Gontareva said the central bank
spent as much as $1.3 billion to meet the demand for the U.S. dollars, but this
didn’t help much.
“A
rate of Hr 11.7 per dollar is seen as a fundamental, it allows to have a balanced
current account,” she explained.
Ukrainian
Constitution defines National Bank’s key function as sustaining the stability
of the domestic currency, which is a price stability, not hryvnia’s price in
terms of dollars, euros or rubles, while many think it’s mostly about the
latter, Gontareva emphasized. “This is the reason why we are preparing the
amendments to the Constitution to clarify this.”
Banking sector
NBU,
an office that regulates an industry of some 160 banks with $14.4 billion in
assets, came up with a list of so called “systemically important
banks,” which is nothing but a definition of those which are “too big
to fail” and will be bailed out by the regulator in case of a negative
scenario. The list includes country’s eight biggest banks: Privatbank,
Oshchadbank, Ukreximbank, Delta Bank, Raiffeisen Bank Aval, Unicredit,
Prominvestbank and Sberbank Rosiyi.
Local
lenders lost $8 billion in early deposit withdrawals this year, which is 26
percent of what people kept on their deposit accounts, preferring mostly
short-term ones.
Declaring
33 banks insolvent and recognizing seven of them involved in money laundering,
the NBU is “cleaning up the banking system,” according to Gontareva
who estimated the annual revenue of the illegal businesses at $19 billion.
NBU’s role in covering public deficit
The
central bank provided $1.4 billion for the state budget this year as it
experiences a fiscal gap of $3.4 billion. Moreover, it sold $8.6 billion to
Naftogaz, a state-run energy behemoth that generates huge losses due to
populist gas prices.
NBU
has $19 billion of government bonds in its portfolio, which is 70 percent of
the locally issued public debt securities, and $9.97 of reserves.
Bonds
are a part of the tool kit for the inflation targeting policy that aims to keep
the growth of consumer prices in the range of predictability. “If we
wouldn’t have a war, we would already be implementing the inflation targeting,”
said Gontareva, who led a major Kyiv-based bond dealer ICU before joining the NBU staff.
“Under such a regime, central bank’s rate will become an effective
monetary measure.”
This
year, the NBU raised its key rate from 6.5 percent to 14 percent in three
moves. “We want the market to think about low rates and long terms,”
central bank governor added.
Changing the NBU
Copying
the model of the U.S. Federal Reserve, whose Federal Open Market Committee’s
meetings are a tool for guiding the financial market, Ukraine’s central bank
plans to hold a big meeting on the 25th of each month.
Moreover,
the regulator cuts its annual expenditure of $700 million all the way to $316
million. It is also selling BTB, a television station covering finance, and
passes the Banking Business University that it manages to the Education
Ministry.
Gontareva
plans to cut the NBU staff by 6,000 people, while now it is an employer of up
to 11,000 specialists. Central bank’s 25 regional branches will be transformed
into four regional centers in Kyiv, Dnipropetrovsk, Lviv and Odesa.
Kyiv Post associate business editor Ivan Verstyuk can
be reached at [email protected].
