Ukraine monetary base drops 5% m/m in January

The monetary base in Ukraine plunged 5.1% m/m in January, the National Bank of Ukraine (NBU) reported on Feb. 10. The money supply dropped 3.3% m/m through the month.

Alexander Paraschiy: The monetary aggregates keep surprising observers. It is quite interesting that the NBU plans to manage inflation targeting when even monetary targeting looks beyond its control. No doubt, the main reason for the  monetary base contraction was the 2.4x surge in cash residuals on treasury accounts in January. The state fiscal services delayed VAT reimbursement (zero VAT reimbursement through the month), which translated into a monetary base contraction. Later on Friday, Deputy Finance Minister Yuriy Butsa reported that the VAT reimbursement due for January was repaid in early February. Against this backdrop, we should see substantial monetary base growth next month.  So far, we keep our monetary base projections unchanged: + 8.6% YTD by the end of 2017.