Ukraine monetary base falls 0.5% in April

Ukraine’s monetary base fell 0.5% m/m in April (-0.9% YTD) compared to a 0.1% m/m increase in the prior month, the National Bank of Ukraine (NBU) reported on May 19. Money supply decreased 4.7% m/m (+2.0% YTD) following the 10.0% decline in the prior month. In April, the NBU purchased UAH 7.0 bln in state bonds compared to UAH 5.9 bln purchased in the previous month.

Alexander Paraschiy: An upsurge in general government deposits by UAH 48.3 bln is the main reason for monetary base decline in April. UAH 8.9 bln in new deposits came from a state bond issue to support Naftogaz. The rest of the deposits we can so far only attribute to continued accumulation of funds on the back of the budget surplus, which surfaced due to payment delays. We observed no other large-scale budget funds flow last month. Against this backdrop, we reiterate our view that the monetary base contraction will be temporary. All accumulated general government deposits are committed for payments and at some point they will be injected into the market. Thus, we are keeping our monetary base projection unchanged at +23.0% YTD for 2015.