The National Bank of Ukraine (NBU) on Thursday, for the fourth time since the beginning of the war, bought government war bonds. This time for UAH 10 billion while earlier the purchases were valued at UAH 20 billion, bringing its portfolio of these securities to UAH 70 billion, follows from a report on its website.
According to the report, this is the third buyout since the beginning of April, the total amount this month has reached UAH 50 billion.
As reported, the total volume of issuance of war bonds is up to UAH 400 billion.
At market auctions since March 1, their sales amounted to UAH 38.07 billion, $93.8 million and EUR 176.5 million.
Finance Minister Serhiy Marchenko previously predicted a state budget deficit of $5-7 billion a month for April-May, compared with $2.7 billion in March.
The Board of the National Bank of Ukraine (NBU) on 8 March 2022 decided to purchase war bonds for the amount of UAH 20 billion due to the need to finance the Armed Forces of Ukraine and for the duration of martial law.
“At the same time, the NBU will only provide limited financing for the critical expenses of the government. This will allow to minimize the risks of high inflation and disrupting macrofinancial stability and will facilitate quick return to market-driven operation of economy and financial markets after the war,” the central bank said on Tuesday.
This amount paid for war bonds constitutes approximately 1.3% of the total amount of Ukraine’s state budget expenditures for 2022.
The NBU said that the NBU is not a solo or even main sponsor of the government expenses.
“Despite the war, Ukrainian enterprises pay their taxes and large amounts are donated by people to support the Army. Our international partners also provide massive military, financial and humanitarian assistance,” the regulator said.
The central bank said that the NBU will take a separate decision if the further financing of critical expenses is required. It will take into account the military situation, social and economic standing of Ukraine, situation in financial markets and public finances, as well as other sources of budget financing.
“Lending to the government is a temporary measure taken by the NBU due to martial law. After the war is over and the economy is back to operating on market-driven principles, the NBU will return to its standard inflation-targeting regime with a floating exchange rate and will be reinstated the ban of financing the government,” the National Bank said.
The regulator said that the Verkhovna Rada of Ukraine has amended the laws in order to allow these transactions between the NBU and government. Namely, it has decided temporarily for the duration of martial law to waive Article 54 of the Law of Ukraine on the National Bank of Ukraine that prohibits the NBU from granting loans to the state.
On March 1, Ukraine held the first auction for the placement of government domestic loan war bonds, at which it attracted UAH 8.122 billion for the period of one year at 11% per annum. According to the Ministry of Finance, a total of 10 applications were submitted for the auction, all of them were satisfied.
In addition, another auction was held, at which UAH 20.7 million was raised at 10% per annum for 56 days.
The funds from the bonds will be used to meet the needs of the Armed Forces of Ukraine and the uninterrupted provision of the financial needs of the state under martial law, the ministry said.
As reported, the total volume of issuance of military bonds is up to UAH 400 billion. They can be purchased by the National Bank. However, according to available information, it was not among the buyers in the first auction.
