A) Credit-and-monetary policy and monetary reform

The National Bank of Ukraine consistently has pursued a reasonable credit and monetary policy. Using the mechanism of monetary leverage, the control over the condition of money supply in circulation was implemented. This made it possible, on a regular basis, to lower the NBU discount rate, to secure stability of the currency, and eventually, to implement monetary reform successfully and introduce the national currency - the hryvnia.

By the efforts of the NBU's specialists and services, the preparatory for monetary reform was carried out and the manufacture of the sufficient supply of new bank-notes and coins was arranged. It was ensured that bank-notes and coins were delivered promptly to all the regions of the country. The needed instruction documents were developed for all the agencies that fulfilled the interchange of money. The decisive role for reform‚ the term of issuance of the hryvnia, the rate of exchange of old money to new, the definition of the mechanism for issuance of the hryvnia, and the formation of the denomination structure of the supply of the new money -- all were spelled out by the NBU's management.

Monetary reform in Ukraine, in a wide interpretation, pursued at least three aims: to create the national monetary system of the independent Ukrainian state; to ensure the constancy of the national money on the level which is appropriate to stimulate the economic and social development of the country with the aid of monetary instruments; to ensure the functioning of the new monetary system pursuant to requirements of the rules of market-oriented economy.

The volume of cash in circulation not only has not increased during the period of reform, it decreased by nearly 150 mln UAH.

Due to an increased number of time deposits of business entities and the public, the liquidity of commercial banks increased by about 150 mln UAH and had amounted to 500-600 mln UAH by late October 1996. This contributed to the growth of volumes of credits provided to business entities by commercial banks. A trend in the growth of the volumes of long-term crediting appeared.

The structure of money supply improved. The reform facilitated more active receipt of payments paid by the population for communal and other services, and increased volume of the selling of goods.

After the monetary reform, the NBU sharply faced a new challenge. It had to secure stability of the national currency. It is difficult to over-estimate the importance of the role of financial stabilization. The advantages of this stabilization include the imposition of market guidelines, regulators, market stimuli for business entities, the creation of new economic medium, and a sound basis for a new economic system.

Steps taken on this path are as follows:

• successful monetary policy, which has been oriented at the macroeconomic stabilization of the economy and has contributed to further disinflation;
• achievement of stabilization of the official exchange rate of the national currency to foreign currencies and a stable par between the official rate and the market rate;
• increase in the volume and improvement of the structure of official currency reserves needed to support the exchange rate of the hryvnia to foreign currencies;
• suspension of the practice of non-sanctioned issuance of payment means applied by commercial banks.
• incorporation of the new system of electronic inter-bank settlements; and
• transition of the banking system to the International Accounting Standards in the beginning of 1998;

Since 1993, the National Bank of Ukraine has begun to develop Principal Guidelines of Monetary-Credit Policy. Guidelines provided by this regulatory act are aimed at scotching inflation, provision of the stability of the national currency, and increasing the effectiveness of the operation of both the economy of the country on the whole, and the banking system especially.

During the time of its activity, the NBU has developed a number of instruments for regulation of the monetary-credit market. It set up the procedure for formation of mandatory reserves by commercial banks, appropriate mechanisms for the issuance and withdrawal of credit funds, defined the rules for the fulfillment of open-market operations, such as credit auctions, collateral crediting, and transactions on the share market.

Since 1994, with a view toward providing the equitable access to NBU's credits for all commercial banks, the National Bank renounced direct crediting of banks against production-related targeted programs and put credit auctions into practice. In order to support the short-term liquidity of commercial banks, the NBU instituted lombard crediting - crediting on the security of highly liquid securities.

One mechanism for the regulation of the monetary-credit market, which the National Bank applies is the discount rate on credits, the size of which is defined depending on the level of inflation, demand and supply for credits at auctions and the inter-bank market. During the last several years, the National Bank has undertaken appropriate measures for the gradual decline of the discount rate, which basically was positive‚ i.e., was higher than the level of inflation. This policy of the NBU, aimed at supporting of the stability of the national currency, encouraged corporations and the public to allocation temporarily free funds in the establishments of banks, and lessened the outflow of funds to the currency market.

Date: 2015-01-11; view: 977