The strengthening of the hryvnia exchange rate at the end of 2012 to the level, which is close to the level at the beginning of the year, shows that there are fundamental grounds for devaluation of the national currency and proves that the currency policy of the National Bank of Ukraine (NBU) was correct, the head of the group of advisors to the National Bank governor, Valeriy Lytvytsky, has said.

"Where are those experts who predicted the UAH 8.50/$1 or UAH 9.00/$1 exchange rate for the end of the year? The NBU again proved that there is consistency between what it said and what it did, and the exchange policy is not divided into phases of the political cycle," he told Interfax-Ukraine on Friday.

Lytvytsky said that the slight weakening of the exchange rate over the past two days to UAH 8.06/$1 is a technical adjustment or a bounce after its sharp strengthening from UAH 8.15/$1 to UAH 8.00/$1.

The advisor also reminded that over the past days the NBU resumed purchases of foreign currency.
Commenting on the prospects of 2013, he said that some fiscal and monetary relaxation with the right selection of the policy required for the stirring up of the economy will be safe both for price and currency stability.

Lytvytsky added that the too low inflation in the first months of 2012 and small deflation later have formed preconditions for the safe expansion of money supply.

"Now it's obvious that money injections are required so that the economy did not deepen into recession. We should return the upward pace and ensure the consistent growth. Today all countries use this method," he said.

Lytvytsky noted that the inflation reference point of 4.6% stipulated in the national budget for 2013 allows switching to the said policy.

"It's important that it was not a wasted effort. Money should be first used for infrastructure projects," Lytvytsky said.

The advisor expressed the opinion that the opportunities of boosting consumption, which supports high growth in trade at around 15%, are close to the absolute limit, passing which the funds will go to increase deposits and imports.

"We should overcome the investment anemia and the NBU jointly the banking system with the help of the government is able to do this," the expert said.

Commenting on fears linked to the fall in the forex reserves of NBU in 2012, he said that they are groundless, as the reserve level is enough to carry out the competent currency and budget policies and service foreign debts.

"Before the 2008 crisis, the reserves stood at $37 billion and then they shrank to $31 billion, taking into account funds received from the IMF [International Monetary Fund] and other international financial organizations with devaluation of 62%. This year the reserves without financing from IMF narrowed by $6 billion, to $25 billion, while the exchange rate is stable," he said.

Lytvytsky noted that attacks of currency speculators, who tried to take advantage of the devaluation expectations of citizens, were beaten off by the NBU, and this happened not only thanks to the use of currency reserves, but also thanks to the application of a set of measures, in particular, the introduction of obligatory sale of a part of currency income and an imitative to tax speculative currency transactions.

"In November the balance of payment is better than in October… so there is no fundamental pressure on the reserves," Lytvytsky said.



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