Category: Monetary Policy
In recent days, the National Bank of Ukraine (NBU) and its head Valeria Hontareva were sharply criticized in the parliament and press. Corruption, incompetence, and mismanagement of the economy were some of the charges. Obviously, known instances of corruption should be filed with proper authorities for further examination. Accusations of incompetence and mismanagement of the economy are harder to prove but an educated discussion of what has been accomplished by the NBU team and what could have been done differently is entirely possible. In this brief review, we provide an assessment of what we think was key in the evolution of the NBU and the Ukrainian economy since 2014.
Ukraine did not have an independent central bank in its first 23 years. The National Bank of Ukraine was an active player in the process of Ukrainian hyperinflation in the beginning of the 1990s, which greatly exceeded that of other Eastern European countries. Even up until 2015, the National Bank was helping the Cabinet of the Ministers hide the real budget deficit, which became one of the reasons for complete imbalances in government budgets and the resulting devaluation of the hryvna (uah).
Since the Revolution of Dignity, the President’s Office, the National Bank of Ukraine, the Parliament, and the various administrative bodies have begun a wide-ranging program of reform. Which governmental actions have proven to be good for Ukraine’s economy, and which have taken Ukraine in the wrong direction? Tetyana Tyshchuk and Oleksiy Hrybanovsky closely studied the Index for Monitoring Reforms in order to find out which government agencies are true to their word.
The central bank plans a speedy shift from targeting exchange rate to targeting inflation. For this, population expectations and trust to the actions of the authorities is paramount. Therefore, together with convenient measures such as independent central bank and responsible monetary policy, inconvenient measures can be implemented to affect the psychology of people, for example redenomination.
During its existence, the National Bank of Ukraine has issued 23 annual reports. The “text mining” analysis of their content helps track the evolution of the banking market in Ukraine. Moreover, it helps determine how efficient the NBU has been and what goals it has considered to be the most important. Full text is available in Ukrainian and Russian.
Why are central banks independent from politics, what should be their main goals, why do they involve ever more academic economists? During the last 100 years mission and instruments of central banks have seen a few seminal changes. What challenges, problems and objectives are central banks in the world and among them the National Bank of Ukraine currently facing? How are they evolving in response to the rapidly changing environment? These issues will be discussed at the conference “Transformation of Central Banks’ activities” on May 19-20th in Kyiv.
VoxUkraine thinks that it is crucial for our country to continue cooperation with the IMF. Ukraine needs the IMF money and financing from other donors anchored to it. Ukraine needs foreign expertise and advice. Ukraine needs to break the tradition of failed IMF programs and to show that this time is different – that it can be viewed as a trustworthy partner. Most importantly, Ukraine needs reforms stipulated in the program.
VoxUkraine conducted a survey to find out the opinion of bankers on capital controls introduced at the end of 2014 – beginning of 2015. The main conclusion is that there is no unanimity among bankers about these restrictions. However, the number of responses is very limited, so results should be treated with caution.
The IMF Statement About a Possible Cut of Aid to Ukraine is a Disgrace For the Ukrainian Authorities
The IMF Managing Director Christine Lagarde’s statement about a possible cut of aid to Ukraine unless it makes direct specific efforts to fight corruption is a negative signal to the Ukrainian economy. Delay in lending may result in the devaluation of the national currency and slowing down or even reversing the tentative economic growth. Moreover, such statements imply that the Ukrainian authorities have no interest in structural reforms that are essential, primarily for the country and the citizens of Ukraine and not for the external creditors.