Ukraine monetary base falls 2% in January

Ukraine’s monetary base fell 1.9% m/m in January compared to 1.5% m/m in the prior month, the National Bank of Ukraine (NBU) reported on Feb. 19. Money supply fell 2.3% compared to a 1.8% drop in the prior month. Through the month, the NBU purchased UAH 10.0 bln in state bonds (vs. UAH 34.6 bln and USD 0.1 bln in December).

Alexander Paraschiy: Significant ForEx interventions (USD 518 mln) look to be the main reason for monetary base contraction in January despite the NBU continuing to print money for fiscal needs. In fact, a large part of the newly printed hryvnias was used to buy U.S. dollars, thereby depleting the nation’s gross international reserves.

This declining tendency is unlikely to continue since foreign currency has become scarce in the country and its inflow is not secure, even from IFIs. Against this backdrop, the NBU’s targeted monetary base growth of 28% in 2015 (after +8.5% in 2014) is not unrealistic. We’re keeping our forecast for monetary base growth outlook unchanged at 23.0% YTD.