Ukraine’s National Bank chief denies any pressure on bank during his 2-year tenure

The National Bank of Ukraine (NBU) has maintained its independence even in the face of Russia's full-scale war, which has enabled the central bank to operate effectively, according to NBU Governor Andriy Pyshnyy, who was appointed to his position on October 7, 2022.

"In the past two years, I haven't felt any pressure or the need to remind anyone about the NBU's independence. This independence is both a goal and a resource, as it allows us to build a higher level of trust in our policies," Pyshnyy said in an interview with Interfax-Ukraine.

He acknowledged that while everyone is under pressure from the circumstances created by the war, the NBU team has managed to remain effective in promoting open dialogue, justifying their positions, and ensuring all stakeholders understand the importance of preserving the NBU's institutional independence as a shared resource.

Pyshnyy emphasized the significant amount of time he spends on communications, horizontal diplomacy, and explaining the central bank's position.

"In some cases, I even feel that I haven't done enough. So, I do more because when you explain your position and provide justification, you can at least preemptively respond to potential risks," he added.

He highlighted positive outcomes, such as the use of the domestic debt market, rather than currency issuance, to finance defense needs in 2023-2024.

Regarding reports in some media that international partners were pressuring the NBU to devalue the hryvnia ahead of a recent IMF mission visit, Pyshnyy clarified that while macroeconomic indicators like the exchange rate are discussed with the IMF, the NBU remains the sole authority responsible for exchange rate policy.

"We model baseline and alternative scenarios, review the situation because these missions are an opportunity to use expertise and stress-test our views. But does anyone other than the NBU determine currency policy? No, it's exclusively the responsibility of the NBU," Pyshnyy said.

At the same time, he noted the importance of recognizing that, during wartime, "you don't function in a vacuum, and an ivory tower is simply not possible."

Pyshnyy pointed to a productive dialogue with Finance Minister Serhiy Marchenko, which began on his first day in office and has helped revitalize the domestic debt market and eliminate the need for currency issuance to finance the budget deficit.

"I hope this cooperation continues, despite new challenges such as the widening budget deficit," the NBU governor said.

When asked about disagreements with the Ministry of Finance regarding the proposed retroactive tax increase on bank profits from 25% to 50% in 2024, Pyshnyy explained that while he understands the minister's rationale – that this was the only way to pass a package of tax reforms through parliament – the NBU maintained its opposition to the increase and defended its position until the last moment.

"We remain very open to dialogue. Do we need to discuss this? Let's do it. Do we need to provide justification? Let's do it. But we reserve the right to say 'no,' or 'not the right time,' or 'let's do this another way that doesn't introduce additional risks.' And we move forward, step by step," Pyshnyy concluded.

He stressed that the NBU's mandate of price and financial stability and supporting the economy, of which independence is a key component, is clearly defined by law, and there is no need to reconsider it now.