Ukraine Central Bank To Extend Reserve Requirements

KIEV, Ukraine -- Ukraine's central bank indicated on Thursday it would extend minimum reserve requirements to funds obtained from foreign institutions in Ukraine, and take other measures against inflation.

Ukraine's central bank
It said in a statement it was worried by the quick growth of borrowing and credits from external banks in foreign currencies, which may destabilise the domestic financial market.

"In the long term that will lead to an accumulation of risks destabilising the financial sphere, linked with the currency risks brought in by market participants and also dependence on the conditions of global financial markets," it said.

At the moment, banks are required to keep reserves of 1 percent for hryvnia funds which they are free to move about any time and 0.5 percent for hryvnia funds kept for a set period of time.

Reserves of 5 percent and 4 percent are required for funds in foreign currencies and these levels will apply to the funds received from from institutions and banks from Nov. 20.

The bank also said it would keep its overnight refinancing rate, now 9-10 percent, no lower than inflation.

But it was unclear which calculation it would use -- accumulated price rises in the first ten months of the year (11.7 percent), year-on-year rises in the ten months (12.2 percent) or rises of the past twelve months (14.8 percent).

The bank said it would also actively sell certificates of deposit.

Soaring inflation, boosted by higher staple food prices, has led to debates as to whether the central bank should free up or revalue the hryvnia, which is kept in a narrow 5.0-5.06 band to the dollar.

The central bank has said that revaluation could help fight inflation, but President Viktor Yushchenko has spoken out against this and called for an end to all public discussion of the issue.

Source: Guardian Unlimited