4 March 2016
A special meeting of the Financial
Stability Council of Ukraine, chaired by NBU Governor Ms
Valeria Gontareva, was held
on 2 March 2016.
The Council members pointed out that
macroeconomic stabilization is taking hold in Ukraine and the economy shows
signs of recovery, albeit slow and fragile; headline inflation has been on a
firm downward path. In January 2016, the state budget showed a surplus. Also, there are
signs suggesting the gradual recovery of households’ confidence in the banking
sector, which is evidenced by the increase in household deposits in domestic
The Council members underlined the
importance of proceeding with measures to gradually ease
FX regulations in an effort to improve investment climate, contribute to the
efficient implementation of privatization programs and encourage capital
inflows to Ukraine’s economy. The
meeting participants also explored the possibility to revise some
administrative restrictions in the cash FX market, which will contribute to the
efforts to bring the market out of shadow. Some restrictions have become
inefficient and fuel negative market expectations instead of contributing to
efforts to stabilize the FX market,” said Ms Gontareva.
In view of the above, the Financial
Stability Council recommended that the NBU explore the possibility to phase out
FX restrictions in a gradual manner.
At the same time, the Council
members pointed out that external economic factors
pose key challenges to the recovery of the Ukrainian economy and financial
stability. The main downside risks include low prices and weak demand for key
Ukrainian export commodities.
The Council members also pointed to
the growing risks stemming from domestic political turbulence, saying that it
puts cooperation with the IMF and other external partners on hold, slows the
pace of reforms, fuels pessimistic sentiment among
businesses and households, and triggers exchange rate volatility. “It is
critically important for Ukraine to bring the IMF program back on track to
ensure the economic and financial stability at this juncture,” said Deputy
Finance Minister, Mr Shevaliov
in this regard. Such risks to the financial stability and emerging signs of
financial instability call for the need to keep in place some FX restrictions
imposed by the NBU.
The Council members expressed
concerns over such downside risks and called on all stakeholders to take urgent
measures to restore political stability in the country and resume cooperation
with international donors.
about the Council
The Fnancial Stability Council was
established by the Presidential Decree in March 2015. The Council comprises the Governor of the National
Bank of Ukraine, the Minister of Finance of Ukraine (co-chairs of the Council),
Head of the National Securities and Stock Market Commission, Head of the
National Financial Services Commission, Managing Director of the Deposit
Guarantee Fund, First
Deputy Governor of the National Bank of Ukraine, and Deputy Minister of Finance
of Ukraine. The Council c provides a forum for professional discussion of risks
posing a threat to the country’s financial stability. The Council has held two meetings in
2016. The next meeting has been scheduled for April 2016.