Mykola Azarov, Head of the Committee, stressed that the current situation of the National economy requires an urgent response from the Government. The market, according to M. Azarov, lacks supply, which is a serious concern.
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 Favourable situation in International metal markets and the devaluation of the dollar, with respect to other currencies, contributed to economic growth, but, nevertheless, also increased inflation pressure caused by demand, and also through the so-called imported inflation. A poor harvest in 2007 was an extra inflationary factor in the home market.
The policy pursued by the Government in the management of Budget funds also affected the money demand performance. The national currency assets of the Government in The National Bank accounts, after increasing by 67.4% from January to November 2007, in December fell by 71.1%, down to UAH 4.4 billion. This was a significant factor underlying an accelerated growth of monetary aggregates in December.
Under these conditions, The National Bank focused on a greater attractiveness of transactions in national currency, and step-by-step limiting, by economic methods, of attraction funds from abroad. To further restrain the inflationary pressure, The National Bank of Ukraine established, as of 1 January 2008, an Annual Bank Rate equal to 10%.
The People´s Deputies stated that ‘today, the monetary Policy in Ukraine has no definite directions, or an adequate statement of inter-related strategic, intermediate and tactical goals´. The main concern is the absence of a clear-cut statement of the National Bank´s monetary policy intermediate goal.
The Committee is of the opinion that the Government and The National Bank of Ukraine, must take coordinated actions with regard to an anti-inflation policy, formulating amendments to the Draft State Budget, elaborating on well -balanced predictions for the major macro-indices for the current year, and the essentials of the monetary and credit policy to achieve a moderate level of inflation and sufficient economic growth.
Following the discussions, the Committee agreed to put together a resolution, to include the proposals and comments made at the Committee Hearings, concerning the major trends in the Monetary and Credit Policy and the necessary anti-inflation steps.