Ukraine monetary base rises 1.5% in February

Ukraine’s monetary base rose 1.5% m/m in February (+0.5% YTD), compared to a 1.9% m/m decline in the prior month, the National Bank of Ukraine (NBU) reported on March 16. Money supply surged 21.5% m/m (18.9% YTD) compared to a 2.1% m/m decline in the prior month. In February, the NBU purchased UAH 10.0 bln in state bonds, the same as the previous month.

Alexander Paraschiy: Although the NBU engaged in strong ForEx market interventions (USD 506.6 mln) in February, which reduced the monetary base, it also provided the budget’s dominant support, which resulted in monetary base growth. The provisional data is incomplete but we cannot rule out extra NBU support, such as an NBU direct profit wire, on the top of the state bond purchase.

Given that the 2015 budget presumes significant monetary support (deficit funding, financing of quasi-fiscal needs, as well as transfers of NBU profit), we should see further acceleration in monetary base growth in the upcoming months. By the end of the year, we project 23.0% YTD monetary base growth.