Ukraine monetary base increases 0.1% m/m in November

Ukraine’s monetary base growth slowed to 0.1% m/m (13.0% YTD) in November from 1.3% m/m a month ago, according to National Bank of Ukraine (NBU) data released on December 13. Money supply (M3) sped up 0.7% m/m (13.7% ytd) from zero growth over the last two months. The NBU reported no state bond purchases throughout the month. At the same time, sterilizing operations remained high at UAH 23.5 bln deposit certificates placed through the month (UAH 53.4 bln in October).

Alexander Paraschiy: Large foreign currency redemptions (USD 955 mln to the IMF and USD 578 mln on internal bonds) coupled with active USD-denominated securities purchases by non-residents (USD 822 mln) were the main reasons for the modest monetary base growth. The authorities’ behavior is in line with our expectations of further active borrowing with the only difference being that there appeared to be some unidentified non-residents willing to purchase state securities.

Such a change in demand for state bonds enabled avoiding a further hryvnia emission in November, which was reflected in the statistics. With the current political tensions however, we do not see that being possible further on. We should expect the authorities will print more hryvnias in December to cover basic spending needs, pushing up the monetary base by at least 1% m/m and concluding the year at above 14% growth.