The NBU is currently fighting inflation by “binding” the hryvnia, which paralyzes lending, according to KyivWeekly. “The volume of investments and demand on the domestic market is going to wither. Although from the viewpoint of fighting inflation this is the right approach, it is not the key mechanism that the NBU should be applying,” Assistant Professor at the Kyiv School of Economics Olena Besedina said in an interview to Evolution Media.
The expert believes that fiscal policy should the most important instrument for the cabinet and a sharp cut in government expenses can reduce the demand on the domestic market and curb inflation. However, in Ukraine where this measure can hardly be applied as changes grow at negligible pace here.
Besedina ended the interview on a pessimistic note: “With the next parliamentary race just around the corner, it is highly possible that expenditures will grow, so inflation is bound to spiral up in 2012. If nothing is done with the real sector of economy, we will just continue going in circles with the government spurring inflation and the NBU trying to curb it.”