Under complex macroeconomic conditions and influence of the global financial crises, the monetary policy in 2008 was directed to exercising the principal function of the National Bank of Ukraine - maintaining stability of the national monetary unit.

According to the information posted at the official web site of the Central bank of Ukraine, since beginning of 2008 in the context of anti-inflation actions the National Bank of Ukraine has continued to conduct  interest policy targeted for increasing value of the national currency and has taken measures for encouraging positive tendencies in the structure of banks` active-passive transactions. However, such actions not intended to mechanically restrict money supply. As of beginning of October the banking system was fully liquid - banks` liquid deposits twice exceeded their needs, related to the current activity.

Though, at the beginning of October 2008 (under development of the world financial crisis) there was observed strengthening of strain in the Ukrainian financial market, caused by negative information background and deliberately provoked discredit of some banks` financial position. The above-mentioned caused some withdrawal of funds from bank clients` deposit accounts.

Under increase of strain in the Ukrainian financial market in October - November, the National Bank of Ukraine directed its efforts to provide due settlement of banks` accounts, decrease of outflow of funds from the bank system and balancing of the foreign exchange market.

In this context the National Bank of Ukraine has extended banks ability on maintaining their liquidity via refinancing mechanisms, alleviated reserve requirements, restricted performing of some active bank foreign exchange transactions, improved regulation of foreign exchange transactions.

Stabilization arrangements of the National Bank of Ukraine contributed to some decrease of strain at the monetary market of Ukraine, which was followed by gradual discontinuation of outflow of deposits from the banking system, including funds of individuals, increase of bank system liquidity, stabilization of the inter-bank credit market.

Since the end of November the National Bank of Ukraine has started to implement the second phase of stabilization arrangements, the main target whereof is to decrease speculative demand for foreign exchange, as well as to maintain positive tendencies of the banking system stabilization. This phase of stabilization arrangements envisages, in particular:

to limit backing of banks liquidity - regulation of the banking system liquidity is currently exercised by standard procedures, which were used prior to strengthening strain in the market in October;

to adjust formation of banks` required reserves with increasing appeal of national currency active-passive transactions - as of today the required reservation in national currency is decreased to zero;

to undertake actions for increasing national currency value (incl. through increase of interest rates on active-passive transactions of the National Bank of Ukraine) with the purpose of establishing extra incentives   to return deposits to the banking system. Particularly, since December 19 interest rate on overnight credits increased up to 22% (against security) and 25% (blank), and the average weighted interest rate on mobilization transactions increased up to 16.8% annual (in November - 6.0% annual).

To maintain the banking system liquidity, the National Bank of Ukraine granted in December refinancing credits to the total amount of 30.7 UAH billion (including 6.1 UAH billion of overnight credits), comparing to 45.5 UAH billion in November (of which 24.3 UAH billion of overnight credits). Totally since the year beginning the granted refinancing credits amounted to 169.5 UAH billion (of which 91.8 UAH billion of overnight credits).

 In addition, to improve redistribution of provisionally spare money between banks, the National Bank of Ukraine continued effecting transactions on mobilization of banks` funds. In December the mobilization transactions amounted to 3.4 UAH billion (since the year beginning they equaled  57.2 UAH billion).

To enlarge its ability in maintaining banks liquidity, the National Bank of Ukraine has not decreased interest rates on its transactions, following its anti-inflation policy. In 2008 the average weighted interest rate on liquidity maintaining  transactions amounted to 15.3%, comparing to 10.1% in 2007.

Due to the restrained approach in performing refinancing transactions, the banks correspondent accounts slightly decreased in December by 3.3% up to 18.6 UAH billion (since the year beginning - by 2.2%).

However, the seasonal increase of demand for money in the last month of the year (the cash flow outside banks increased in December by 9.5 %, since the year beginning - 39.3%) caused accelerated increase of the monetary base. The monetary base increased in December by 8% (31.5% for the year 2008) - up to 186.7 UAH billion.

To some extent the flow of money supply was influenced by policy of the Government on budget funds control. The government funds in national currency on accounts with the National Bank of Ukraine following their 3.9 time increase - up to 17.0 UAH billion within first 11 months of 2008, decreased in December by 54.6% - to 7.7 UAH billion.  It became a significant factor of accelerating monetary aggregates increase in the last month of the year.

It should be noted, that the National Bank of Ukraine (according to December results) has managed to keep  quantitative criterion of effectiveness of the monetary base (190 UAH billion), stipulated at the Memorandum on Economic and Financial Policy under the International Monetary Fund "Stand-by" programm.

The growth of money supply in December was moderate and amounted to  6.4% (since the year beginning  it increased by 29.9%) up to 514.7 UAH billion.

The natural persons deposits increased in December by 4.3% up to 215.6 UAH billion (since the year begin they increased by 31.1%).  Legal persons` deposits increased by 7.6%  to 142.3 UAH billion (since the year beginning -  by 23%).

The total deposits increased in December by 5.6% (since the year beginning they increased by 27.7%) up to 357.8 UAH billion.

The volume of credit deposits increased in December by 9.3% (since the year beginning - by 71.9%) up to 733.9 UAH billion. Credits granted to legal persons increased in December by 10.2% (since the year beginning - by 69.7%) up to 460.5 UAH billion). Credits granted to natural persons increased by 7.7% in December and by 75.9% since the year beginning up to 273.4 UAH billion. 

Such growth indicators of credit and deposits was greatly influenced by the exchange rate revaluation of previously granted credits.

The value of deposits continued to increased in  December which was the effect of bank actions on stimulation of return of deposits to banking system. So, the average weighted rate on deposits in national currency increased in December from 12% to 13%, in foreign exchange it slightly decreased from 8.3% to 8.2%.  The integral interest rate on deposits increased from 10.8% up to 11.2%.

At the same time in December there decreased the average weighted rate on credits in national currency with its increase in foreign exchange. So,  the average weighted rate on credits in national currency decreased from 22.6% to 21.6%; in foreign exchange it increased from 11.5% to 12.6%. The integral interest rate on credits increased from 18.7% to 19.4.