Newly appointed Governor of the National Bank of Ukraine Kyrylo Shevchenko (L) and Ukrainian President Volodymyr Zelensky walk in National Bank Headquarters on July 20, 2020 in Kyiv. Photo: Presidential Office

Ukraine has a plan B in case of a Russian invasion, explains the Governor, who also adds that he sees the financial situation in Ukraine improving. 

The National Bank of Ukraine, NBU, recently announced that it is raising the key policy rate in Ukraine to 9 percent. it is “aimed at neutralizing the impact of additional pro-inflationary risks, improving inflation expectations, and ensuring steady disinflation toward the target of 5 percent.” NBU added that inflation has reached 10.9 percent in October and that the bank will need to take steps to keep it under control. 

“The NBU estimates inflation continued to slow in November. This was supported by the vanishing effect of last year’s low comparison base, better harvests gathered this year, administrative decisions on public utility rates, and the impact of previous decisions to tighten the monetary policy. Effects of the current weakening of the hryvnia against the U.S. dollar are partially offset by the hryvnia’s strengthening against the currencies of Ukraine’s other major trading partners,” the NBU wrote in a statement. 

In an interview with Bloomberg, NBU Governor Kyrylo Shevchenko said that the situation is getting better and better in Ukraine and that inflation is set to decrease. Among other things, he pointed to the recent resumption of the IMF loan as important.

“In any of its forecasts, we have IMF cooperation behind. So from my point of view, the continuation of the cooperation with the IMF is crucial for Ukraine. It is not only about the money. It is a lot about reputation, it is about trust – this is the crucial point,” he said. 

The Russian threat

Shevchenko added that the current uncertainty in the financial system in Ukraine is due to several factors. Firstly, the problems with inflation, which he calls a global phenomenon, and secondly the recent threat of a new Russian invasion of Ukraine

“For sure, we have a plan B (in case of a Russian invasion), but I can’t talk about it yet,” said Shevchenko, who didn’t want to provide any more details. 

The NBU has been under extensive international scrutiny last year due to the change of management. Former director of NBU, Yakiv Smolii, left his position last year citing political pressure as the reason for his departure. It angered several international institutions such as the IMF as Ukraine had promised not to interfere in the independence of the NBU.

In his interview with Bloomberg, Shevchenko said that the NBU remains independent. Recent stories have said that Shevchenko himself is under pressure. The Ukrainian President Volodymyr Zelensky is said to be unhappy with Shevchenko and wants him out.

“So today, we see attempts by certain factors to influence the decision-making process within the NBU. It is a smear campaign, targeting the NBU and its top management,” Shevchenko said, denying that he is on his way out.