The banking system of Ukraine retains the potential to increase investments in domestic government bonds (OVDP), however, for its implementation, it is necessary to start developing individual investment strategies of banks, as stipulated by the agreements reached within the framework of the program with the International Monetary Fund (IMF), according to the head of the National Bank of Ukraine Andriy Magnificent.
“It’s time to sit down to develop these individual strategies,” he said at a briefing on Thursday, noting that this week’s drop in demand at primary auctions to UAH 1.4 billion is the lowest in the last year and a half.
“I am not inclined to believe that this diagnoses any problem, but, in fact, it may signal the need to concentrate our efforts and start the very strategy that is programmed within the framework of the memorandum with the International Monetary Fund – individual strategies,” Pyshnyi added.
According to him, these individual strategies include, in particular, a careful analysis of the ability of state banks to take the most effective and expanded participation in covering the needs of the state budget due to their active participation in the domestic debt market. “This may require a certain revision, modification of the property policy and the definition of clear strategic guidelines for the state banking sector,” the head of the NBU believes.
He reminded that relevant experience of stimulation has already been accumulated, which consists in the interaction of mix-politics from both the National Bank and the government.
As another example of realizing the potential of increasing investments in OVDP, he cited the growth of OVDP owned by individuals from UAH 30 billion at the beginning of 2023 to UAH 63 billion now.
“That is, we know how to stimulate this process, we know how to ensure it. The depth of the market, in our opinion, makes it possible to use this potential. But yes, it is a matter of concentration of efforts, coordinated actions, individual strategies and an appropriate approach,” Pyshnyi stressed.
The head of the National Bank noted that the ambitious task that the NBU sets for itself for the next six months is to ensure the financing of additional budget needs without using emission sources to cover the budget deficit.
“I see understanding from the government, and we need to work on realizing this vision. The banking system has sufficient potential to cover the need, which is formed at the expense of internal sources,” Pyshnyi said briefly.
As reported, the project of amendments to the 2024 state budget introduced by the government last week provides for the increase of net investments of banks in OVDP by another UAH 220 billion – total borrowing on the domestic market is planned to increase from UAH 525.9 billion to UAH 686.1 billion, while repayments are to be reduced from UAH 444.5 billion to UAH 384.6 billion.
The deputy head of the National Bank of Ukraine, Yuriy Geletiy, clarified that the rollover on the OVDP market at the end of the first half of the year amounted to 124%, and in absolute terms, net financing reached about UAH 45 billion. According to him, since the beginning of July, the rollover has increased to 135%: the involvement amounted to UAH 27 billion with repayment of UAH 10 billion.
“We consider market attraction a priority. There is an appropriate level of liquidity in the system, so it is necessary to work with the Ministry of Finance, first of all, with banks and analyze groups of banks with which you can communicate more actively, cooperate in terms of involvement. First of all, these are, of course, public sector banks,” said Geletiy.
He added that it is necessary to understand what the schedule of expenses will be, and to impose on this schedule the possible involvement in terms of net financing.
