Business news from Ukraine


The National Bank of Ukraine (NBU) has decided from December 13, 2019 to cut its refinancing rate to the level, at which it was two years ago – 13.5% per annum from 15.5% per annum, which was set from October 25, 2019. “The NBU speeds up the monetary policy easing, as the rapid appreciation of the hryvnia makes inflationary pressures decline faster than expected,” the central bank said on Thursday.
The Board of the National Bank said that the stronger hryvnia made inflation decline towards the 5% target faster than envisaged in the latest macroeconomic forecast.
The NBU also said that it will revise the inflation forecast taking into account the situation in the foreign exchange market and will publish the updated macroeconomic forecast, including the future inflation path, at the end of January.
The regulator recalled that according to the October forecast, it plans to reduce the refinancing rate to 8%. However, as part of the next review of the macroeconomic forecast, in January it will publish an updated forecast of the pace of the refinancing rate. The forecast will take into account the impact of consumer demand and FX market conditions on future inflation.
In addition, the NBU will continue to monitor what progress is achieved in implementing key domestic reforms. These reforms are those that are envisaged in the memorandum of understanding signed by the Ukrainian government and the NBU, and the judicial reform required to establish the rule of law in Ukraine.
Commenting on the current situation, the regulator said that in November 2019, consumer inflation decreased sharply, reaching 5.1% year-over-year, which was below the NBU’s latest forecast. “In such a way, inflation reached the medium-term target of 5%, set by the NBU in 2015,” the central bank said.
The steady disinflation has been driven by a gradual easing of underlying pressures on prices, reflected in a slowdown of core inflation, and by lower energy prices. Inflation slowed markedly due to both the strengthening of the hryvnia and an improvement in inflation expectations. The above factors neutralized the pressure on prices from robust consumer demand and worse harvest of some vegetables.
The NBU said that the hryvnia strengthened due to several reasons. In October-November, the excess supply of foreign currency was mainly driven by proceeds from Ukrainian exports, in particular thanks to a record harvest of grain and oil crops, and selling foreign currency coming from borrowings of state-owned companies. Foreigners continued to invest in hryvnia government bonds, but it did not have major influence on the foreign exchange market, unlike in the past months. At the same time, the NBU actively purchased excess foreign currency to replenish international reserves. Net foreign exchange interventions have totaled over $5.5 billion since the start of 2019.
“Reaching the staff-level agreement on the new cooperation program with the International Monetary Fund is an important milestone in the progress of structural reforms in Ukraine as well as in maintaining macrofinancial stability and steady economic growth,” the NBU said.
The central bank paid attention other risks that the NBU took into consideration when making its previous monetary policy decision remain in place. In particular, the risk of rising threats to macrofinancial stability persists because of court rulings and pressure on the NBU. If materialized, these risks could worsen exchange rate and inflation expectations, and make it harder for Ukraine to access the international capital markets at a time when debt repayments are peaking.
According to the press service of the NBU, the following external risks remain relevant a complete halt of the transit of Russian gas through Ukraine, intensified trade tensions and more turbulent global financial markets and an escalation of the military conflict and new trade restrictions introduced by Russia.
As reported, the NBU began a cycle of easing monetary policy rates on April 26 this year, lowering the refinancing rate to 17.5% per annum from the level of 18% per annum, at which the central bank kept it from the beginning of September 2018. Then, in the middle of July and early September of the current year, the National Bank lowered the refinancing rate by 0.5 p.p. each time, and at the end of October lowered it by 1 p.p.
A summary of the discussion by Monetary Policy Committee members that preceded this decision will be published on December 23, 2019. The next meeting of the NBU Board on monetary policy issues will be held on January 30, 2020 as scheduled.



The international reserves of Ukraine in November 2019 increased, according to preliminary data, by 2.5%, or $500 million, to $21.932 billion, according to the website of the National Bank of Ukraine (NBU). According to the central bank, the increase in international reserves is due, first of all, to the maintenance of a favorable situation in the country’s foreign exchange market. The National Bank notes that, despite a significant slowdown in the inflow of foreign capital into government bonds compared to the previous months, currency supply in the market remained significantly greater than demand due to substantial sales of foreign currency by exporters, which allowed the NBU to replenish international reserves by $897.8 million (net purchase). In particular, the central bank bought $777.8 million at a single rate and $120 million by choosing the best rate. The NBU did not carry out any interventions on the sale of currency last month.
According to the report, for the indicated period, $644.7 million was allocated for servicing and repaying the state debt in foreign currency. Of this amount, EUR425.5 million was paid on government domestic loan bonds, $9.2 million on eurobonds. In addition, $84.4 million were allocated to fulfill obligations to the International Monetary Fund.
These expenses were partially offset by revenues of $304.9 million from the placement of government domestic loan bonds denominated in foreign currency, the NBU notes.



The National Bank of Ukraine (NBU) has approved a resolution on qualified providers of electronic trust services placed on the trust list under a proposal of the certificate authority, the NBU has reported on its website. According to the report, this document was drawn up with the aim of improving the quality, convenience and speed of customer service by banks, as well as to ensure compliance of the processes of providing electronic trust services with European and international standards. The resolution establishes the conditions for obtaining the status of a qualified provider and determines the requirements for the rules of its work, the composition of employees of the qualified provider and their functional responsibilities, as well as the requirements for managing access to information resources of the qualified provider. In addition, the document defines the requirements for the physical environment used by the qualified provider in the process of providing qualified electronic trust services and for ensuring the continuity of services provided by the qualified provider, as well as for managing keys of the qualified provider and using cryptographic information protection tools.
The new internal regulations of the certification center in order to bring the conditions of its activities in line with the requirements of the law on electronic trust services are outlined in the document. The document defines a list of qualified electronic trust services, the provision of which is provided by a certification center; organizational structure of the certification center; the procedure for entering of information/changes about providers into the trust list; certificate policy for the provision of qualified electronic trust services by the certification center; position of certification practices during the provision of a certified electronic trust service by a certification center.
The National Bank also canceled irrelevant legal acts regulating the activities of the NBU certification center and bank key certification centers in accordance with the terms defined in the law on electronic digital signature. The changes are outlined in NBU No. 137 resolution dated November 21, 2019 on the recognition of certain legal acts of the National Bank of Ukraine as invalid.

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The National Bank of Ukraine (NBU) has decided from October 25 to lower the refinancing rate to 15.5% per annum from 16.5% per annum, at which it has been since September 6 of this year.
“The National Bank continues the cycle of easing monetary policy, as it expects inflation to slow to the target of 5%,” the central bank said on Thursday.
The NBU Board said that the basis of this stable trend is the gradual weakening of fundamental pressure on prices, the sign of which is the rapid slowdown in underlying inflation.
“Tight monetary policy has become one of the reasons for the strengthening of the exchange rate and improvement of inflation expectations. This influences prices significantly and exceeds the influence of factors that, on the contrary, push prices upward, in particular, the effect of still stable consumer demand,” the regulator said.
According to its forecasts, inflation this year will drop to 6.3%, and next year it will fall into the target range and reach medium-term 5% at the end of 2020.
“As before, the sharpest decrease in the refinancing rate is expected during 2020 along with the return of inflation to the target range and the improvement of inflation expectations,” the NBU said.

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The National Bank of Ukraine (NBU) has improved its hryvnia exchange rate forecast for 2020 as the International Monetary Fund (IMF) and the World Bank did, Ukrainian Finance Minister Oksana Markarova has said, without specifying the concrete figure. In all forecasts and in forecasts of the National Bank, the exchange rate for the next year is strengthened, that is, the rate on which the budget was based (UAH 28.20/$1). Obviously, it will not be like that anymore, the finance minister said in an interview with the Voice of America in Washington.
She added that soon the Finance Ministry and the government will receive an updated forecast of the Ministry of Economic Development, Trade and Agriculture, on the basis of which changes will be made to the draft national budget for 2020.
The forecasts of all the organizations, the National Bank say that the rate is strengthening and this is a long-term trend. Therefore, there will be fluctuations, but we should expect that this strengthening is not some small fluctuation of this year, but this is a new normality, Markarova said.
As reported, since the beginning of 2019, the hryvnia exchange rate has strengthened by 10.3%, to UAH 24.835244/$1.
The National Bank of Ukraine does not officially announce its exchange rate forecasts, at the same time, it sends them to the government for drawing up the draft national budget.

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The updated macro-forecast of the National Bank of Ukraine (NBU) assumes receiving $2 billion from the International Monetary Fund (IMF) under the Extended Fund Facility, as well as the issue of eurobonds worth $1 billion, deputy governor of the NBU Dmytro Sologub has said at a press conference in Kyiv.
“We expect that in the fourth quarter the new program is likely to start with the IMF, and Ukraine will receive $2 billion. And we also expect $2 billion in each of the next years as part of the new structural financing program,” he said.
Sologub stressed that such an assessment is an expert commentary. According to him, if the funds arrive a little earlier or a little later, it will not have a significant impact on other macroeconomic parameters, except for international reserves.
The banker also estimated, based on the example of other countries and the size of Ukraine’s quota in the IMF, that the size of the new program could be in the range of $5-10 billion for a period of 36 to 48 months.
“We have no insight, this is our expert assessment,” he said.
Sologub also said that the National Bank laid down in its forecast another entry of Ukraine to foreign markets with eurobonds in the amount of about $1 billion as its expert assessment.