Taking part in the Meeting were Representatives from The National Bank of Ukraine, The Ministry of Economy, and Ministry of Finance.
During discussions it was noted that the Monetary and Credit Market had been affected in 2007 by the pressure of severe inflation, caused by both demand and supply factors, and also energised by inflation expectations. The principal external inflation factors were the two-fold increase in the price of imported gas over the past two years, and high oil and metal price growth rates. A low harvest in 2007 was an extra inflationary factor in the home market. Inflation was also fuelled by a gradual increase in the level of income of the population, due to enhanced social guarantees, which was not supported by a relevant economic growth and increases in labour productivity.
It was emphasized that given a sufficient banking system liquidity level, the volumes of refinancing operations with banks during 2007 were insignificant, and accounted for 2.5 billion Hryvnias. The average weighted interest rate on refinancing credits of the Central Bank in 2007 was 10.1% annually, including 11.1% for overnight credits. As of 1 January 2008, the Annual Discount Rate was raised from 8% to 10%.
I. Shumylo, Executive Director (Economy) of The National Bank of Ukraine, feels that the Government should determine a realistic inflation index. In his opinion, 'unrealistic estimates give birth to considerable distrust and higher inflation expectations'.
Those taking the floor also commented that to achieve confidence in its predictions, the Government should announce its plans for 2009 and the three following years, as regards gas prices and those tariffs which are regulated administratively. The public and business sectors should know and have confidence in a medium-term price performance pattern presented by the Government.
Other matters touched on by the speakers included a ban on unfounded rises in tariffs for housing and utility services, transport, etc, by business entities at local level, effective intervention in individual commodity markets in the event of temporary deficiencies; development of a schedule of money movements in the Governmental account, and its forwarding to The National Bank, etc.
The National Bank will maintain the stability of National Currency within the limits specified in the Basic Principles of Monetary and Credit Policy in 2008 ( 4.95-5.25 Hryvnias per US Dollar), and more actively attract Banks' funds.
M. Azarov, Committee Chairman, noted that the Government should consolidate the major budget parameters with The National Bank, otherwise 'any anti-inflation measures will be pointless'.
M. Azarov listed the factors which fuelled inflation in 2007. These were the considerable rise in prices of agricultural produce and food in the World Market, creating an additional inflationary pressure on the Home Market; the high level of World Oil prices; and the 'liberal fiscal policy of the Government due to early Parliamentary election'.
The People's Deputies believe that the success of an anti-inflation policy depends, to a large extent, on the cohesive operation of The Cabinet of Ministers of Ukraine, The National Bank of Ukraine, and Executive and Legislative branches of Power.
The outcome of these discussions was that The Committee resolved to draft concrete proposals aimed at improving the Monetary and Credit Policy, and to return to this issue at the next Committee Meeting.