Posts Tagged ‘NBU’


The IMF says “No” to Ukraine – as long predicted it would

December 1, 2016

The IMF in very plain words has refused Ukraine the next allocated tranche of $1.3 billion.  The February $2 billion tranche naturally gets kicked further into the future.

This should come as no surprise whatsoever.

In February, April, June and most recently (and at length) in October, the blog has repeatedly written (and stated at closed door forums) that IMF cooperation would be indefinitely suspended due to the fact that Ukraine would no longer be desperate for the money and therefore the motivation of parliamentarians and implementing institutions alike would simply disappear – until such time as the situation becomes so acute that they are once again forced to act.

“…….meeting the November 2016 and the $1.3 billion IMF tranche requirements appears optimistic, then meeting the obligations for the scheduled February 2017 tranche of $2 billion is perhaps as remote as riding a unicorn naked through the centre of Kyiv without once being snapped by a smartphone.”

A told you so statement – and the long list of issues in the above-linked October entry remain to be solved as do the repercussions it outlines.


Though the above entry makes forecast of 2017 IMF related issues, it wisely steers clear of any prophecy regarding a return by Ukrainian to its obligations under the IMF agreement – and thus a return to IMF funding.

It is thus time to be foolish and/or reckless and forecast just how long it will before before the Ukrainian situation becomes once again so dire that parliamentarians and implementing institutions are forced to put their ingrained fecklessness to one side and act with the integrity expected of them – but of which they are consistently absent unless truly without any other options.

Short of something akin to force majeure coming from either The Kremlin or Washington DC dramatically changing the environment within which Ukraine finds itself, there is no urgency to address Ukrainian obligations to the IMF in 2017.

(The only other “incentive” would perhaps be the “Firtashisation” – or privately conveyed possibilities thereof – to powerful and influential Ukrainian figures that nefariously control Verkhovna Rada votes and who have “strayed” within the laws of European nations.)

Certainly nothing approaching obligation compliance will begin before Spring 2017 – the constituency will first be allowed to emerge from a winter under radically increased utility pricing and the application of soothing subsidies – which lends to the ability of the current government and majority coalition to survive the increasingly cacophonous noise relating to early Verkhovna Rada elections.

Realistically (in the current environment) it seems highly unlikely that Ukraine will make any great strides toward getting the IMF agreements back on track until Autumn 2017 at the earliest – if at all in 2017.

Thus predictions for the IMF-Ukraine lending agreement to recommence?

Perhaps 2018.


Populist political guns aim at Gontareva (and the NBU)

October 17, 2016

With Ukraine no longer being dependent upon the IMF, and with international debts to be serviced more than manageable in 2017, it is perhaps no surprise that the current head of the National Bank of Ukraine (NBU) is now a legitimate political target when it comes to taking a scalp from the President.


Thus, during the week 6 – 10 October at a meeting of the IMF and World Bank in Washington DC, a brochure was circulated with the clear intention of undermining Ms Gontareva as head of the National Bank of Ukraine.

Behind the brochure sits Sergei Taruta – Verkhovna Rada parliamentarian, businessman and oligarch.

To be entirely blunt, having only recently met with senior people within these institutions in Ukraine, if the intention was to undermine Ms Gontareva (and/or the NBU policies) then it was sure to find little if any traction at the meeting of these international institutional lenders.

Whilst neither institution support specific politicians or institutional appointees (like Ms Gontareva), instead supporting State institutions and internal processes, quite clearly both fully recognise what they consider to be very positive change within the NBU under her leadership.  It seems unlikely that there would be any private conversation that would encourage her removal from office until the changes she has brought are far more consolidated and (perhaps) irreversible.


It is therefore difficult to believe that Sergei Taruta could seriously expect that a brochure clearly designed to undermine the head of the NBU would find traction among the IMF and WB elite in Washington DC.

If he did then he has a truly woeful understanding of the relationship between the current NBU management and that of the IMF and WB in Ukraine.

Needless to say, the brochure brought with it no result at the IMF and WB gathering in DC that was in any way helpful for Mr Taruta – perhaps the opposite.

Nevertheless on 14th October Mr Taruta decided to pursue to resignation of Ms Gontareva through the machinery of the Verkhovna Rada, declaring on his intentions on his Facebook page together with accusations of incompetence and corruption.

That same day the NBU website questioned the allegations, the framing of his claims, and the motivations of Mr Taruta.  Indeed the NBU requested that such machinations be scrutinised by the Ukrainian law enforcement entities.

A reader will now rightly note the true audience – that of the Ukrainian constituency.

Not to be left on the periphery, on 17th October, the ever populist Yulia Tymoshenko pushed Batkivshchyna to the fore as a rallying point for Verkhovna Rada Deputies to coalesce around to force the removal of Ms Gontareva.  Ms Tymoshenko’s main charge being that Ms Gontareva is in charge of the destruction of the State at the behest of President Poroshenko.

Her secondary charge, and clearly she has noted the real reason for Sergei Taruta’s attack on the NBU, was that the free-floating (more or less) of the Ukrainian currency has caused all those with foreign currency loans to struggle and/or default as the currency weakened significantly when finding its true market value.

Thus Mr Taruta’s attempt to attract struggling SME’s and entrepreneurs to the Taruta political sphere is now duly challenged by Ms Tymoshenko’s act – whilst both simultaneously attempt to remove a presidential appointed (Verkhovna Rada approved) scalp who is now fair play having completed many of the most unpopular IMF reforms.

Perhaps Ms Gontaerva is incompetent and/or corrupt as Mr Taruta claims.  Perhaps she is President Poroshenko’s tool for the destruction of the State as Ms Tymoshenko orates.  If so however, neither Ms Tymoshenko nor Mr Taruta have the moral high ground nor are particularly concerned about it considering the company they keep and the activities of those within their orbit – both business and political.

It is far more likely that they both simply see the IMF as now expendable and thus Ms Gontareva as no longer essential/untouchable – and therefore she is nothing more than a possible scalp for a populist “win”.

If they managed to remove her, would State policy change?  Probably not.



Privat Bank – A privat(e) or public future ahead?

November 8, 2015

Privat Bank is part of Privat Group, and is owned by Ihor Kolomoisky and Gennady Bogolyubov.

Privat Bank has for many years been systemically important to the Ukrainian banking system, despite operating as more or less bankrupt the entire time.

Thus when the IMF made demands of Ukraine, and specifically the National Bank of Ukraine under the stewardship of Valeriya Hontareva (who for many years was virtually the Poroshenko family banker), problems relating to capitalisation and quality of assets were a certainty to become problematic for Privat Bank.

Unsurprisingly during the summer of 2015 Privat Bank had to restructure loans with its creditors, and Messrs Kolomoisky and Bogolyubov had to inject some cash/stand surety personally.  Something of a reversal when for many years Privat Bank has simply been used to finance Privat Group activities with much of its loan portfolio being to other Privat associated companies.  Hence Privat Bank has always operated more or less bankrupt and as a piggy bank for Kolomoisky/Bogolyubov use, holding a very high portfolio of direct and indirect Privat Group assets of dubious quality.  Nevertheless it has become systemically important, holding more than 30% of the bank accounts of Ukrainians and Ukrainian companies.

In short, the IMF is insisting all banks are suitably capitalised and Ms Hontareva, quite rightly, is making no exceptions.  The NBU assessment of Privat Bank is not yet complete, so whilst it continues to operate as a private concern, presumably the liquidity therefore not an immediate concern, it is far too soon to consider Privat Bank “stable” as far as the NBU is concerned – and who knows what the NBU assessment will be (or perhaps is)?


On 6th November, Alexander Dubilet the Chairman of Privat Bank received a text message stating Privat Bank was temporarily going into administration, and thus public control via the NBU, being a systemic bank.  Clearly that has proven to be false – thus far.

So was the text message simply mischief?  Could such a decision relating to Privat Bank have been kept secret from Ihor Kolomoisky?

Should it be seen in connection with the arrest of the Ukrop Party leader and Ihor Kolomoisky associate Gennady Korban on 3rd November – some 3 days prior to the text message received by Mr Dubilet?

It is little known that the same day as the Korban arrest,  Gennady Bogolyubov (Ihor Kolomoisky’s business partner) flew to Kyiv and saw President Poroshenko.  The question arises whether the meeting was to defer or defend Privat Bank from temporary administration and thus public ownership, or to intercede on the behalf of Gennady Korban?  As the latter would seem unlikely – with both Messrs Kolomoisky and Bogolyubov undoubtedly prepared to throw Mr Korban under a bus to protect Privat, is Mr Korban the sacrificial lamb offered instead of the NBU taking control of Privat Bank?

Perhaps they are not linked at all.

It may be that the arrest of Mr Korban has actually delayed a decision for the NBU to take control of Privat Bank as linkage would have be made – whether it exist or not.  The arrest of Mr Korban and the NBU taking control of Privat Bank within a matter of days would be perceived as President Poroshenko taking decisive action in his battle with Mr Kolomoisky, yet also the perception of political persecution would have been perhaps overwhelming.

All of that said, if Privat Bank is failing the NBU assessment, just how long could any delay in the NBU taking control be put off?  The IMF arrives in Kyiv on 9th December and remains until 18th December.  Hiding any failures of a systemically critical bank from the IMF during that visit seems rather difficult – if there are failures to hide.  Was the meeting of Gennady Bogolyubov with President Poroshenko therefore a bid to buy time during which any failures will be urgently overcome?  If so what time frame was given to delay any NBU action?

If a decision is made for the NBU to take control of Privat Bank, then when is the best political time to announce it?  Before the IMF visit in order to project a robust adherence to IMF conditions despite any domestic speculation of dismembering the Kolomoisky empire by the President for political purposes – or once it arrives and time any such announcement whilst the IMF is in Kyiv with the inference “the IMF expects” as a deflection from the undoubted charges of political persecution that will follow?

What happens if the NBU assumes control of Privat Bank?  If it carries out a full internal audit over the past “x” number of years, what dirty and illicit acts will it discover?  What then?

Within the next month, perhaps within the next week or two, the question hanging over immediate term management of Privat will be answered – Privat(e), or public?


A transition bank that fails due to transition? – FDI bureaucracy

July 19, 2015

On Monday 20th July Kyivska Rus” Bank, insolvent since March 2015 must be liquidated – except that need not have been the case – and indeed may at the 11th hour prove not to be the case, although the clock is almost entirely run down.

It need not be the case, as since April 2015, a large private UK investor with a global investment portfolio and exposure in the Ukrainian market since 2007, has sought to purchase a transition bank – that bank being Kyivska Rus” Bank.  The transition bank was to, and perhaps may yet, invest in agriculture, construction and energy businesses in Ukraine.

Aside from saving the nation UAH 2 billion in losses – the State would otherwise have to pay about UAH 1 billion by way of depositor guarantees and assume the loss of a UAH 450 refinancing loan provided – those liabilities which would be assumed by the new owners.  The UK investors will also put $100 million into the bank activities, and thus into the aforementioned Ukrainian markets that it has identified as of interest.

That matters have reached 48 hours before liquidation of  Kyivska Rus” Bank , and the issue has still not been settled despite interest in the purchase 4 months ago, is simply due to the usual unhelpful Ukrainian bureaucracy.

To be specific, the NBU (necessarily) changed its rules after documents were submitted, and the Anti-monopoly which has a role in the process, saw its head replaced (perhaps less necessarily).

Thus new documents were required to meet new rules and a new anti-monopoly review conducted in line with new rules and under new leadership.

To aggravate matters further, the creation of transition banks – or not – seemingly lacks a certain amount of compatibility amongst Ukrainian statute, unsurprisingly given the calibre of those that create statute in Ukraine.

The Depositor Guarantee Fund requires an investor to have the NBU approval to purchase the bank before it is tuned into a transition bank.  At odds with this, the Law of Ukraine (On Banks and Banking Activity) requires this after the bank has been created.

Needless to say, that whilst this bureaucratic disaster is not going to turn away a UK private investor that has been in the Ukrainian market for 8 years, it is certainly going to delay the investment that was going to come via the transition bank – for if  Kyivska Rus” Bank is liquidated on 20th, the another suitable banking entity has to be identified with debts that the investor deems acceptable to assume.


It is difficult to see how the Ukrainian economy would not benefit from a few well funded international transition banks.

By Tuesday morning, we will know whether a combination of finding wiggle room in the text of the relevant statues, and a super-fast tracking of effort by the NBU and Anti-Monopoly Committee will have saved the investment day and sent the right message to the private FDI community – or not.

Can it be that a transition bank that is/was to have $100 million to invest into the Ukrainian economy, will fail to materialise due to a Ukrainian bureaucratic transition?

Something to watch for on Monday that probably won’t make the headlines.


NBU Blues – Valerie Gontareva on borrowed time?

March 7, 2015

It appears that the storm clouds are gathering around the current Head of the National Bank of Ukraine, Valerie Gontareva.

In particular the ultra-populist Oleh Lyashko and his Radical Party seem determined to take a scalp after the precipitous decline of the Hryvnia against the US Dollar over the past month or so.  The slight rise in recent days after the NBU raised interest rates from 19.5% to 30% is too little too late when populists are searching for a head to hunt.  That head, being the Head of the NBU.

Making a disclaimer, for those who may have forgotten, this blog is in no way supportive of Oleg Lyashko or the Radical Party – indeed it has an inherent repulsion for all populist politics.

As with all populists, Mr Lyashko wants a head to severe, put on a pike, and wave to the masses as some for of retribution in relation to the fall of the Hryvnia – this despite the fact he (and the Radical Party) could offer no alternative policies to those pursued by the NBU.

It is far easier to “mouth off” from the floor of the Rada than it is to take any personal responsibility by heading critical institutions.  That said, Mr Lyashko does have appeal – if you have had a full lobotomy and prefer form over substance, or enjoy the sight of fisticuffs in the legislature, or aggressive verbose rhetoric over critical thinking, or are so retarded you believe Ukraine can gain without suffering any pain in the immediate term.  If you are looking for the absurd within the theatre of the absurd, he’s your politician.

Perhaps in the next government reshuffle, he should be given an ego massaging impressive title – Deputy Prime Minister, or First Deputy Prime Minister – one that carries little policy directing/forming weight, but would nevertheless put him amongst those that the Ukrainian constituency would hold responsible for failures yet to come?  Alternatively, make him  Deputy Prime Minister, or First Deputy Prime Minister in any forthcoming reshuffle with the specific responsibility for reform implementation, forcing him to walk his rhetorical talk and suffer the consequences should he fail to deliver.

There can be no room for supporting the Radical Party that is simply a vehicle for the promotion of Oleg Lyashko’s ego.  Personality politics have failed Ukraine for the last decade and more, thus supporting any form of return to that state of affairs is entirely retarded.  Further, populists like Lyashko (and Ms Tymoshenko in her prime), have an ego that projects the idea that if you are not for them, you are against them – and if you are against them, then you are against “the people”.  A position that is both cancerous to democracy, and also absolute flapdoodle and codswallop.

Regardless – policy counts for far more than political party or political personality in a pluralistic parliament.  No matter where good policy comes from, it remains good policy – no different from ineffective or counterproductive policy.  Like not the packaging, but the product.

Having now vented over the odious populism of Oleg Lyashko, this entry is not written in defence of  Valerie Gontareva per se either.  However, to be entirely fair, Ms Gontareva has not exactly had the easiest of circumstances to navigate, or the national forex reserves, to do much more than she has.  Perhaps the only significant criticism this blog would raise, is that relating to not moving as swiftly as has been possible when it comes to liquidating banks that are a liability rather than an asset to the Ukrainian banking system.

Considering the sheer number of Ukrainian banks, a large number of which are small and almost unheard of, owned by (in various degrees of nefarious) wealthy Ukrainians with the sole purpose(s) of either laundering cash for the owners, or making large loans to the owners as and when they want to loan themselves other people’s money, the slow rate of liquidation of these entities, and thus confidence building in the banking system by their removal, is perhaps the only issue that could have been dealt with more swiftly – and robustly.

That said, 44 banks (of more than 100) have now gone into bankruptcy incurring losses upon Ukraine of almost 9% of GDP.  Thus there is perhaps a necessity to manage the speed at which such a cleansing occurs.

It may be that the NBU will act more swiftly now that a few bank owners may be less keen to own banks – whether those actions occur under the leadership of Ms Gontareva, or not.

Nevertheless, there is a real possibility that Ms Gontareva’s days as NBU Head are numbered.

Gontareva & Lyashko

Gontareva & Lyashko

It goes without saying that the Lyashko action against her displays exceptionally poor timing considering the IMF is yet to make a decision on a 4 year loan (though it seems likely it will be made very soon – and favourably).  To put into question Ms Gontareva’s position, who spent many hours in negotiations with the IMF, prior to a favourable decision, does not seem particularly clever politics (though populist politics are seldom clever).  How her departure from office will be viewed by potential investors is a serious consideration.

Ergo, if her head is to roll, it would seem unlikely to be within the next few days – but rather within weeks/a month.  There are enough wiser (and certainly cooler) heads than Mr Lyashko within the Rada to pay attention to the timeliness of her demise and the implications thereof – even if it seems her leaving is inevitable for the sake of holding together a constitutional majority coalition with the Radical Party.  There are many necessary constitutional changes to be made after all.

That she will still be in post by the end of April currently seems very unlikely unless a deal can be struck with Mr Lyashko and the Radical Party to call off the populist dogs.  Indeed, Ms Gonareva is far more likely to resign than wait to be pushed out.

The question that follows then relates to any replacement.

A return to a politically controlled NBU Head would not sit well with any lenders upon which Ukraine is now (and will be) reliant.  The perception of an independent National Bank is paramount.

In the frame then, former head of VTB Bank Vadim Pushkarev, or Chairman of the Board of “Raiffeisen Bank Aval” Vladimir Lavrenchuk, or former Treasury Secretary Alexander Shlapak, and Chairman of the Board of JSC “Oschadbank” Andrew Pyshniy?  Perhaps Sergey Yaremenko a former NBU executive?

The uncertainty now surrounding Ms Gontareva is not going to facilitate any return of confidence in the NBU over the coming days, or weeks, and that – in case Mr Lyashko isn’t aware – has an effect that in all probability puts more pressure on the Hryvnia.  Indeed it can be argued that Mr Lyashko and the Radical Party have added yet one more pressure on the currency due to populist theatrics – despite them having no policy alternatives themselves.


Ministry of Economic Development & Trade – Reformation

February 2, 2015

It has been a few months since Aivaras Abromavicius took over the running of the Ministry of Economic Development & Trade.  A ministry, it has to be said, that has a portfolio that in true Soviet fashion, has considerable and unwarranted overlap with the Ministry of Finance and the National Bank of Ukraine – not to mention unnecessary bureaucratic nonsense that frustrates all three institutions by extension.

That is not to say that some horizontal overlap is not a necessary democratic instrument for self-policing, accountability and transparency – but the degree of overlap should be manageable and productive – rather than a heavy bureaucratic and political burden , notwithstanding an unnecessary (power and funding) turf war, depending upon Ministers in post.

It is therefore encouraging that Mr Abromavicius is reforming his ministry with immediate effect.  Much of its existing scope will be passed on to more appropriate ministries.  As a result 50% of ministry staff will go – soon.  The current 25 departments within the ministry will subsequently shrink to 15, and their functions will be reduced and become more focused.

Reformation indeed – although perhaps not transformation, for that takes longer.  For example, society may reform a thief and instill within him the discipline not to steal – yet the urge to steal remains.  A reformation certainly, but transformation?  Would transformation not occur only when that desire to steal itself has been extinguished?  Ergo, current reformation would be a step toward transformation, and not the end goal in and of itself.

With this in mind, eyes turn toward who Mr Abromavicius will nominate as Deputy Minister to the Cabinet of Ministers on 4th February, and two subsequent positions within the ministry hierarchy next week.  Reformers almost undoubtedly, but will they be given the time to become transformers?

The current Government of Ukraine is rapidly running out of time to begin visible and tangible reforms – both amongst the domestic constituency and within certain capitals.  All are waiting to see a reform that has its effects felt by the voter, and where the voter interacts with the State administrative arms.

All are wanting to see physically manifest (via effective implementation) something that they can see and therefore believe in – even if it is a single noticeable nationwide reform.  Government Ukraine would be extremely foolish to believe that all those citizens who have identified themselves as pro-Ukrainian are necessarily pro the current Government of Ukraine.  Pro-Ukrainian, currently, seems to identify far more with shunning the Kremlin yoke it wants to shackle Ukraine within again, than it has to do will belief in the current government.  The external “them” and “us”, for now eclipsing the internal “them” and “us”.  The societal clock is most certainly ticking down from reformation expectancy toward frustration, and the war in the east will not be forever accepted as a universal excuse not to deliver reform (even if transformation will take far longer).


Currency racketeering

January 21, 2015

Last week, the Governor of the National Bank of Ukraine, Valeriya Gontareva, told the RADA in a statement, that the NBU simply doesn’t have the foreign currency reserves to meet the demand of the nation’s citizenry – by orders of magnitude.

This despite numerous administrative measures undertaken by the NBU over the last year restricting access to, and limiting daily withdrawals in foreign currency.  It follows therefore, that such policies have led to a more visible black market in currency exchange (though it has always existed).  As Ms Gontareva rightly states however, “A black currency market will exist until the removal of restrictions on the market.

It appears now, that the NBU is to (either temporarily or permanently) remove the currency trading licenses from the money trading kiosks to be found everywhere in Ukraine.  Whether or not this will somehow significantly ease demand for foreign currency or assist the NBU and the traditional banks throughout Ukraine when it comes to controlling foreign currency and its subsequent exchange is difficult to fathom.  However what these licensed currency exchanges are not, is genuinely “black market”, as they are licensed, and therefore legitimate.

To be perfectly blunt, there is little chance of buying US$ or Euro with Hryvnia at many of these kiosks these days anyway.  Converting US$/Euro to Hryvnia is all that many will offer to do.

At many of the traditional high street banks, unless you are a customer of the bank, they will also refuse to exchange Hryvnia for foreign currency.  At some banks chains they will only do so at the branch where your account was opened, rather than at any branch of the bank.

There is then the matter of the personal daily cash limit, which is currently about Euro 800 or US$ 930.

If, for example, the traditional high street bank is offering to buy US$ 1 at UAH 16.50 or sell US$1 at 16.95, then the licensed kiosks will be buying US 1 at UAH 17.25 and selling at US1 at UAH 18.00.

The genuine black market money exchanges, such as those to be found at  7KM market or Kniga in Odessa, to name but two, are (as of two days ago) buying US$ 1 at UAH 19.3 and selling US$ 1 for UAH 20.5. – A clear UAH 3.00 greater than the traditional banks, and UAH 2.00 greater than the exchange kiosks, whether buying or selling the US$.

Quite simply, the black market traders can afford to buy US$ at far above the traditional bank or kiosk rates because they are selling the US$ at much greater rates – and the demand to buy the US$ at remarkable rates is robustly present, whether that demand be a desire to convert Hryvnia to a more stable currency and put it under the mattress, or for any other purchasing/payment reasons.

Now some may speculate, if they be of a cynical nature, that some traditional bank branches and local currency exchange kiosks, that consistently state they have no foreign currency to sell, may well be colluding with/supplying some of the black market currency traders with foreign currency to sell at significantly greater margins.  That said, some of the black market currency traders would not need such funding assistance.

Whatever the case, quite how suspending or removing the licenses for the currency exchange rate kiosks will assist with controlling the black market exchanges, or help the NBU manage foreign currency, remains unclear.  What such a move will do is force the Ukrainian public to use only the traditional banks to exchange currency legally – good news for the bank owners – or force the Ukrainian public to the black market currency traders, and thus expand that black market.

Thus we may ponder whether the move to delegitimise currently legitimate currency exchange kiosks is a counterproductive attempt to deal with the currency black market, or an opportune moment to rid the nation of these enterprises to the benefit of the traditional banks under the guise of foreign currency control or combating the black market.


The 2015 Budget

November 12, 2014

Currently the IMF is back in town – and as a lender of last resort, undoubtedly welcome in government circles in lieu of nobody else.

It arrives at a time when a programme (of sorts) is being – and is almost – thrashed out by the parties that will form the majority coalition.

Big ticket issues such as the abolition of MP immunity (less some form of parliamentary privilege whilst engaged directly in political matters) and the need to prioritise new election laws are agreed, amongst many other issues.  Perhaps a dynamic start to the next RADA session awaits by way of laws passed – if not by way of their actual implementation.

However, amongst those major issues, is the small matter of a budget for 2015.  Something that will be of interest to the wandering minstrels/mandarins of the IMF.

It appears the National Bank of Ukraine has already suggested that an exchange rate of UAH 12.95 = $1 act as the foundation of the Ukrainian 2015 budget to policymakers – whilst making clear that the NBU has but limited ability to step in and support the Hryvnia, and even less desire to do so.

“Our country will not live in the fixed exchange rate anymore.  This brings our country to neither the economic growth nor stability of the financial system.” – Valeriya Gontareva, Governor of the NBU.  Thus the position of the NBU is clear.

However, UAH 12.95/$1 may be rather optimistic – or not.

Yesterday the exchange rate on the street was UAH 14.50/$1.  Even with good news that will probably come from the IMF, the continued drip feeding of covering Ukrainian debt by Europeans, and whatever comes from the international funding and investment gathering soon, any additional market confidence in the Hryvnia is likely to be short lived as Kremlin troops and large quantities of hardware continue to flow into The Donbas.

Though it maybe prudent for the Ukrainian leadership to simply write-off any budgetary revenues from The Donbas for the purposes of planning for 2015 – it is far more difficult to write-off the effects of the anticipated expansion of the currently held turf outside the direct control of the Ukrainian authorities.  Whether that push comes now, or in the Spring, most expect it to occur – and Ukraine will clearly need to resist.

Such an occurrence, when/if it arrives, seems highly unlikely to support a UAH 12.95/$1 budgetary foundation.

It may very well be that  Ms Gontareva is privy to information that is kept from the public realm and that would make UAH 12.95/$1 quite reasonable for the suggested foundation of the 2015 State budget – and indeed it is to be hoped that is the case, for if a free-floating Hryvnia does have a mean value of UAH 12.95 over 2015, some form of stability will have been achieved far beyond the boundaries of economic and fiscal management..

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