President Meets With Central Bank Governor

KIEV, Ukraine -- President Viktor Yushchenko, who has been opposing the rapid appreciation of the hryvnia as a means of fighting inflation, met the governor of the National Bank of Ukraine for a “conversation.”

Volodymyr Stelmakh

The meeting with Volodymyr Stelmakh comes a day after a senior official at the NBU had disclosed plans to allow the hryvnia within days to gain value against the dollar.

The plans caused nervousness on the forex market on Monday, with the hryvnia rising sharply against the dollar in trading between commercial banks.

“The president had the conversation with the governor of the National Bank,” Oleksandr Shlapak, the first deputy chief-of-staff at the Yushchenko office, said at a press conference. “There must be clarity of how we should behave.”

Yushchenko, himself a former long time governor of the NBU, is known as an advocate of conservative monetary policy calling for the stability of the hryvnia.

Yushchenko is the architect of the current policy, first introduced in September 1997, allowing the hryvnia to trade only within a specified band. The policy a reaction to the Russian financial meltdown that year and helped to prevent similar turbulence in Ukraine.

Shlapak, Yushchenko’s key economic advisor and a former deputy governor at the NBU, said the appreciation of the hryvnia is not the proper response to Ukraine’s inflation challenge.

Prime Minister Yulia Tymoshenko has been pushing for the hryvnia to appreciate against the dollar as a measure to fight the country’s skyrocketing inflation.

The inflation, helped by rising costs of energy and food, rose to more than 30% if measured between April and April 2007, caused by Tymoshenko’s controversial social spending policy.

Yushchenko has persistently called for launching market-oriented measures in response to the inflation challenge, such as liberalization of trade in grain and natural gas.

Oleksandr Savchenko, a deputy governor of the NBU, said Monday that the hryvnia will “very soon,” perhaps within “one, two, or three days” be allowed to have great volatility in trading against the dollar.

The comment led the hryvnia rising 2.3% against the dollar to close at 4.66 hryvnias to the dollar on Monday.

Source: Ukrainian Journal