Date: February 7, 2017
The National Bank of Ukraine should facilitate lending in the real sector of the national economy instead of hampering its development.
This was an opinion expressed in the Tuesday interview with the newspaper "Den" by the head of the Verkhovna Rada Committee on Financial Policy and Banking Serhiy Rybalka.
According to Mr. Rybalka, one of the priorities of financial sector reform should be to focus the monetary policy on stimulating growth.
"Today, the National Bank has restricted its attention only to curbing inflation by transferring the economy into a financial starvation mode. All the NBU does is to deplete the bank funds through the high interest rates on deposit certificates. In this situation the banks see no sense in seeking for new opportunities, looking for new corporate clients and providing loans. It restricts the investment activity and does not stimulate the creation of new jobs. As a result, it impedes the crisis alleviation process, prevents new investments in the logistics, energy infrastructure, promising high-tech industries," said S. Rybalka.
He also added that the monetary instruments stimulating growth can be introduced by the NBU and the government only if there is necessary infrastructure in place "so that the money end up not in the foreign exchange market but be channeled through banks directly to the industry for the important national investment projects."
"We need to create a series of growth stimulating institutions, from the Development Bank to the Export Credit Agency, which corresponds to the best international practices." Providing preferential lending to small and medium-sized businesses, supporting infrastructure projects will eventually foster domestic demand, and bring flywheel of the economy into motion. There is however an important premise: low-interest loans should be awarded only for projects with sufficient level of technological innovation and added value. Cultivating the national high tech sector must become more profitable than selling raw metals, round timber or primitive fertilizers, only then we will be able to escape from the abyss of poverty," Mr. Rybalka said.
In his opinion, it is necessary "to reshape the banking sector towards a more active role in the real economy, and towards offering products that would meet the needs of business, industry and common citizens who work at these enterprises, receive a scholarship or a salary from the taxes of these enterprises."
Also Mr. Rybalka brought up some examples from around the world, according to which the central bank plays a crucial role and is held responsible for the development of the national economy at the legislative level. "The US Federal Reserve for instance is responsible, apart from keeping an eye on prices, for "a high level of output and employment." If we are talking about the role of the central banks in Canada, Australia and many other countries, we have to think not only about monetary and price stability but, first of all, about the economic growth and the overall welfare of citizens. The same case is true for the Bank of Israel, which is officially in charge of the high level of production, employment, national income and capital investments," Mr. Rybalka stressed.
"Without investments in high-tech production there will be no wealth in the country. The core reason for all our crises and for the low hryvnia exchange rate is that we sell cheap raw materials to the world and buy expensive goods. That is why we have to reshape our financial sector and primarily the banking system and revamp the monetary policy to achieve the long-term goals of ensuring economic growth and changing the structure of the national economy. To make this happen, we have to make sure that the strategy adhered to by the NBU and by other regulators is in line with the long-term strategy of the government," - he stressed.
It should be borne in mind that the Rada Finance Committee has approved and recommended for implementation the Government's Strategy for the Development of the Banking Sector until 2020. The document was developed by a joint effort of leading experts, scientists, former heads of profile NBU departments and representatives of the banking community. Based on the Strategy, the Committee has developed a number of draft laws, including on improving the NBU transparency, reforming the deposit guarantee system and stimulating lending to the economy.