Ukraine monetary base inches up 0.2% in June

Ukraine’s monetary base inched up 0.2% m/m in June (-0.8% YTD) compared to a 0.2% m/m decline in the prior month, the National Bank of Ukraine (NBU) reported on July 10. Money supply increased 1.1% m/m (+1.9% YTD) compared to a 1.3% m/m decline in the prior month. In June, the NBU purchased UAH 10.5 bln in state bonds compared to UAH 8.3 bln purchased in the previous month.

Alexander Paraschiy: Increased gross international reserves in June (with NBU interventions amounting to USD 209 mln in net purchases), as well as slowing budget collections, are the main factors behind the slight increase in the monetary base. The purchase of foreign currency at the ForEx led to hryvnia injections into the economy that translated into upward pressure on the monetary aggregate. What’s more, in May we observed the central budget switching into deficit (UAH 2.6 bln) compared to a hefty surplus in the prior month (UAH 4.0 bln).  We believe the trend was maintained in June (data is not available yet), thus cotributing to  the monetary base growth. 

These developments are in line with our expectations. We expect the authorities will start spending accumulated state funds more actively in the upcoming months in what will translate into an accelerated rise in the monetary base. We project monetary base growing 23.0% YTD by the end of 2015.