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Ashburn

The Verkhovna Rada is trying to raise a rebellion against the IMF

At the meeting of the Verkhovna Rada Committee on Finance, tax and customs policy, controlled, of course, a fraction of the "Servant of the people", 17 June discussed a draft resolution "On report of the Chairman of the National Bank of Ukraine the Verkhovna Rada of Ukraine on the National Bank of Ukraine". The document was prepared (and actually secret) as a parliamentary response to the report of the Chairman of NBU reporting on the activities of the previous month.

In the draft resolution harshly criticized the activities of the Bank since 2014 to the present day.

Of course, the document still must be approved by the Parliament, but against the failed vote on 18 June the government Program of Smugala, when votes "for" was not enough — despite a personal request from Zelensky, this seems quite real.

But the main thing — even his approval will not affect monetary policy and exchange rate policy as the NBU takes only what he brought to the execution of the IMF. The maximum that can make the Ukrainian authorities to bargain for the appointment of new Directors of the Bank. But the last word in this matter will be for Washington.

The same list of parliamentary complaints was pretty long.

The main is that the Board of the NBU pursuing a strict monetary policy, starting in 2014 have failed to support sustainable economic growth and the resumption of lending to the economy.

Real discount rate (ie the nominal rate minus the inflation rate) was one of the highest in the world.

Spending superrigid monetary policy, the NBU made a sharp demonetization of economy of Ukraine. The ratio of money supply to nominal GDP in Ukraine declined from 54.4% in 2014 to 34.2% in 2019 compared To other countries the amount of money in the Ukrainian economy is obviously insufficient. For comparison, in Russia this indicator in 2019 was also short, but was 47.3%.

Also, the NBU blamed the fact that the cooling conditions of the economy as the discount (base) rate it is used the rate on certificates of Deposit, not the refinancing rate. High rates on certificates of Deposit (within 2019 — 13,5-18%) led to a reorientation of the banking system for financial transactions in certificates of Deposit and bonds of domestic government loan (further — bonds) and the destruction of the normal functioning of the credit market. On the background of excessive liquidity in the banking system (liquidity, i.e. the availability of money, twice the standards) has been the collapse of lending to the real production: the ratio of corporate loans to GDP fell to 21% in 2019 in the normal level of 60-70%. And as a result — a slowdown in the economic growth and the aggravation of the fall in industrial production.

The leadership of the NBU has also been accused of subversive activities on the secondary market of government bonds and in establishing banking regulations, which lead to the fact that with sufficient foreign currency liquidity, banks are not interested in purchasing foreign currency bonds of the government, which needs foreign currency for payments on foreign debts.

Allowed the NBU artificial strengthening of the hryvnia in 2019 Ukrainian MPs associated with insufficient redemption of currency reserves on the background of the too high yields of government bonds, which led to a massive inflow of speculative capital.

The results of these and other claims, the authors of the project claim that officials of the NBU in connection with failure to discharge the functions specified by the relevant law, does not have an impeccable business reputation. And stay of such persons in leading positions, the NBU is contrary to law. In the end, it is proposed to create a Temporary investigative Commission of the Verkhovna Rada concerning investigation of activity of NBU in the years 2014-2019.

The IMF has consistently praised the leadership of the NBU in 2014, as it strictly followed the recommendations of the IMF. And such was reduced to two points.

First, a policy of rigid inflation targeting, that is, the suppression of inflation at any cost, including the price of bleeding, and hence the gradual destruction of the economy. Of course, the IMF understand the consequences of such a policy and has established specific targets to reduce lending to the real sector, demonetization, and so on.

Second, in 2015-2016, the IMF was interested in the cleanup of the banking sector from the competition in the face of local financial institutions. That was successfully done. And the fact that in the process the head of the NBU and the state pretty warmed hands on the assets of liquidated banks, the IMF complacently closed her eyes.

In terms of support, nothing has changed today. The recently approved Memorandum with the IMF, which was signed by the Ukrainian President, Prime Minister, Minister of Finance and the head of the NBU, but which is dictated to Washington's "regional Committee", is directly confirmed by the loyalty of the previously selected monetary and exchange rate policies, including further reduction of lending to the real sector of the economy. Monetary (aka monetary) policy of the NBU called balanced, and its implementation together with a flexible exchange rate, as it turns out, "renewed competitiveness" and "improve the position of Ukraine on foreign markets." Moreover, the first paragraph of the Memorandum concerning the NBU, and then home for the IMF says about the provision of institutionally strong and independent of the NBU. The only task for the NBU is still indicated inflation targeting. It is the Ukrainian party undertakes to "refrain from any actions that might mean political interference in the independence of the NBU (according to the policy decision, the limited duration of tenure and legal protection of managers and staff)". And "to ensure permanence of the inflation targets and principles of monetary policy".

In other words, despite the justice of the claims of deputies to the leadership of the NBU, the resolution about the poor assessment of his actions will be a tempest in a teapot. Under fixed policy the NBU is the highest state leaders have already signed up. To convince the IMF of the need for replacement of obedient leadership will also be difficult. But even in the case of approval of such replacement, nothing will change.