The current legislation in Ukraine does not contain a clear-cut rule for the NBU profit distribution. This causes uncertainty about the shares distributed to the NBU or the government and gives rise to costly negotiations. As a consequence, it possibly generates conflicts between these state authorities, which tend to weaken monetary stability in Ukraine by increasing long-term inflationary expectations and losing confidence in the hryvnia.
To avoid such problems, we argue for revising the current legislation concerning the NBU profit distribution. Specifically, we propose to establish a clear-cut rule for the NBU profit distribution that specifies the recipients of the NBU profit and shares received by each recipient. In our opinion, the NBU profit should be divided equally between the government and the NBU.
