Ukraine monetary base speeds up to 6.9% m/m in March

Ukraine’s monetary base sped up 6.9% m/m in March (7.4% YTD) after 4.7% m/m growth in February, the National Bank of Ukraine (NBU) reported on April 11. Money supply grew only 1.0% m/m (3.8% YTD) after a 4.4% m/m increase in the prior month.

Alexander Paraschiy: The picture of the monetary base growth is quite mixed. On the one side, we see the NBU offering support for the state budget (purchasing UAH 4.4 bln in state bonds through the month) as well as continuing to actively refinance the banking sector (UAH 32.3 bln). Yet these factors can’t explain the monetary base speeding up since NBU bond purchases decreased significantly (to UAH 4.4 bln from UAH 19.3 bln in February) while sterilization operations quadrupled to UAH 111.9 bln from UAH 22.3 bln in the prior month.

Therefore, we believe direct NBU wires to the budget are responsible for the growth, but we will know for sure what happened only after the monthly Treasury report and detailed monetary statistics are released at the end of the month.

Such expansion of the monetary base has exceeded our estimates. In light of the NBU’s laisser-faire policy at the ForEx, we can hardly anticipate significant tightening over the upcoming months and we’re revising our end-2014 monetary base growth projection to 19.8% (from our previous estimate of 15.5% yoy).