National Bank Will Promise Them Anything

It is curious that the pretext was given by Mr. Yushchenko himself. Last Wednesday he promised journalists that on Thursday he would make public the amount of hard-currency reserves "which have risen after receiving loans..." Which he did not do, of course. The ex-minister at once trumpeted for the whole country to hear (via the UNIAN Agency) that NBU currency reserves are "catastrophically low" and "they are not sufficient to maintain the (hryvnia's exchange) rate," while the cessation of tenders at the Ukrainian Currency Exchange on March 19 is just but recognition of the impossibility of propping up the hryvnia. Mr. Suslov tried to bring this home by adding that Ukraine is on the edge of an inflationary abyss.

It is not ruled out that even such revealing forecasts (we must admit, to be fair, that Mr. Suslov, working in the government, was more diplomatic and optimistic) would have been lost among many other attacks on the National Bank if they had not fallen on ready ground. The point is that the NBU closed access to information on hard-currency reserves, which had been steadily depleting owing to chronic repayment of foreign debts, in January. It is officially known that in January the NBU reserves were $680 million. According to unofficial information, the reserves dropped to $360-380 million in January-March (i.e., in the pre-loan period). Incidentally, one source suggests that the NBU managed to attract some additional sources of funding, for the amount spent from the reserve fund does not cover expenditures for foreign payments, administrative regulation of the hryvnia rate, and servicing government bonds.

Whatever the case, the NBU chief really kept at bay the topic of NBU coffers and asked all governmental officials "not to speak about a destabilized rate." Mr. Yushchenko's subordinates, not yet as proficient as he in the art of talking at length and saying nothing, occasionally said something like: "the reserves have risen by 40 million" or "the reserves have dropped by 40 million," but this clarified nothing because the initial figure was not known. Today's information is just as clear. NBU reserves have gone up by $300 million at the expense of IMF and World Bank loans. That is we can suppose, in purely arithmetical terms, that the level of reserves has approached the January index. But this is still very, very low. Having taken out new loans, we are still more bogged down in debt. For  this year we have to shell out Hr 1.8-billion as repayment of the old pre-March debts alone (as estimated by Mr. Suslov, $2.2 billion, i.e., 40% of budget revenues).

It would be interesting to know who could venture to state the level of NBU reserves with such an apparent discrepancy of figures, which is, by the way, not only a financial indicator but also a symbol of statehood? And how then (we already see that the reserves are meager) could we believe the NBU chief, who promised on April 4 both a smooth devaluation of the hryvnia and (!) a reduction of the discount rate (a couple of weeks ago Mr. Yushchenko was tearing out his hair, telling us it was wrong to correlate the banking and discount rates and it was impossible and dangerous to reduce the former in today's situation)? Incidentally, Mr. Yushchenko, contrary to all forecasts, continues to insist that the hryvnia exchange rate has been stabilized. "Over the past four days, the NBU has been quite actively buying hard currency on the Interbank Currency Exchange," said he (since September, the NBU has only been selling hard currency, partially satisfying Exchange demand - Author). If this is at last true, then why did Mr. Yushchenko call reduction of the discount rate "a political step toward bringing down the price of money, so that it might be more accessible to the economy?" Meanwhile, they speak more often and aloud in Cabinet of Ministers corridors about the necessity of still "more additional" IMF loans...

PS: On April 5 the NBU press service released a statement indicating that the National Bank hard-currency reserves as of April 1 were $945 million.