Ukraine monetary base falls 2.3% in September

Ukraine’s monetary base fell 2.3% m/m in September (-3.6% YTD) compared to a 1.1% m/m decline in the prior month, the National Bank of Ukraine (NBU) reported on Oct. 13. Money supply increased 1.7 % m/m (+0.8% YTD) compared to a 2.1% m/m decline in the prior month.  In September, the NBU purchased UAH 5.0 bln in state bonds compared to UAH 4.1 bln purchased in the previous month (UAH 67.1 bln for 9M15).

Alexander Paraschiy: Further accumulation of public funds on Treasury accounts remains the key source of monetary base contraction. According to the Finance Ministry, the general budget reached a UAH 28.3 bln surplus by the end of August. And as of Oct. 1, the Treasury reported already UAH 47.1 bln accumulations at its unified account. We still expect the authorities to spend all its accumulated funds by the year end. However, it is not clear how that could be arranged safely given that huge sums of hryvnia liquidity may threaten the national currency’s stability. We might see a scenario similar to the events of 2012 when huge disbursements were arranged just on the last month of the year (in the single month of December 2012, the monetary base surged 7% after -0.5% YTD for 11M12).  Against this backdrop, even disregarding the money aggregates’ contraction in 9M15, we still are projecting 15.3% YTD monetary base growth in 2015.