Ukraine monetary base increases 1.7% m/m in August

Ukraine’s monetary base increased 1.7% m/m (+11.1% YTD) and money supply (M3) grew 0.6% m/m (+10.7% YTD) in August, according to National Bank of Ukraine (NBU) data released on September 9. The NBU’s state bond purchases declined to UAH 2.4 bln from UAH 4.3 bln a month ago, while its state bonds portfolio grew UAH 32.2 bln YTD in 8M13.

Alexander Paraschiy: Ukraine’s Finance Ministry was not very active with its state bonds placements: only UAH 0.9 bln in local currency bonds and USD 0.2 bln in dollar bonds have been raised on the internal market in August. At the same time, UAH 5.2 bln of bonds were due only internally in August. Against this backdrop, we believe reduced government deposits at the NBU were the main reason for the monetary base increase. 

We anticipate further increases in money aggregates in light of continued problems with state collections. If the NBU keeps generating money that fast, the monetary base might expand more than 15% throughout the year. Still, we believe that a potential increase in devaluation pressure on the hryvniawill soon limit the money aggregate increase. We project a 13.2% yoy monetary base increase in 2013.