Ukraine monetary base slides 0.2% in October

Ukraine monetary base slid 0.2% m/m (up 5.5% YTD) in October after a 0.7% m/m decline in September, the National Bank of Ukraine (NBU) reported on Nov. 10. Money supply (M3) was flat m/m in October (+6.1% YTD) compared to a 0.6% m/m increase in the prior month.

Alexander Paraschiy: October’s further decline in the monetary base isn’t what we anticipated. We see an absence of hryvnia printing for budget deficit financing as the main factor for the downward trend (the NBU reduced its T-bills stock by UAH 1.7 bln in October).  The NBU’s resumed foreign cash purchases at the ForEx (USD 274.5 mln in October) also did not help boost the monetary base.

Though the monetary base is underperforming our estimates, we still expect a swelled budget deficit closer to the year end – partially financed by NBU T-bill purchases – which should translate into monetary base expansion. A sharp year-end surge in budget outlays, with a subsequent surge in the monetary base, has been the rule in Ukraine at least for the last ten years. Against this backdrop, we still project the monetary base to rise 7.6% YTD in 2016.