Annual Report 2014
Annual Report 2014 Annual Report 2014 National Bank of Ukraine National Bank of Ukraine 1 Annual Report 2014 Dear ladies and gentlemen, The year 2014, which was full of dramatic events in all areas of the country’s social and economic life, is now history. Old, unresolved economic problems, such as persistent budget and balance of payments deficits, weak fiscal policy, an ailing energy sector that has gone unreformed for years and a steep decline in the health of banks in the wake of significant deposit outflows - all were evident at the very start of the year. That, together with external aggression, posed great challenges for the National Bank in all of the priority lines of its activity - monetary policy, banking regulation and supervision, providing support for banks, cash circulation and financial infrastructure. This created the need for radical and multidimensional action. Monetary policy required fundamental changes on a top priority basis. In this light, the National Bank made a painful but an absolutely necessary decision to adopt a flexible exchange rate regime as early as the start of the year. A market-based exchange rate prevents economic shocks and is beneficial for the balance of payments current account. In spite of that, in the reporting year, the country was hit by two waves of devaluation resulting from the unwillingness to take the unpopular step to stop maintaining a stable hryvnia exchange rate by artificial means in previous more favorable years, delayed reforms in other economy sectors, as well as an ongoing military conflict. The National Bank had to impose certain restrictions, raise the refinancing rate, and use other monetary policy tools in order to ease high inflation and devaluation pressure.
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