The Ukrainian economy in recent months demonstrates a paradoxical phenomenon that requires detailed analysis. Despite unprecedented international financial support that fully covers the needs of the state budget, as well as record foreign exchange reserves, the country has faced symptoms of a systemic economic crisis. A key indicator of these problems is inflation, which reached a critical level of 12.9% in January 2025, significantly exceeding the National Bank of Ukraine's targets.

Particular attention is drawn to the atypical behavior of the banking sector. By the end of 2024, both state and non-state banks recorded record profits.However, this occurred not through active lending to the real sector of the economy, but through operations with deposit certificates of the National Bank of Ukraine. Instead of directing funds to lending to the economy, Ukrainian banks place them on deposits with the NBU, receiving guaranteed profits. This situation indicates a serious disruption in the monetary transmission mechanism and inefficient use of financial resources during wartime.

The increase in the NBU's key rate to 14.5% in January 2025 confirmed a fundamental misunderstanding of the nature of current high inflation in Ukraine. Unlike classic demand-driven inflation, Ukraine faces cost-push inflation caused by structural deformations of the war economy. In conditions where real inflation for the population is 15-20%, and the NBU's inflation forecasting system consistently fails, raising the rate by 1 percentage point cannot provide effective protection for hryvnia savings. This calls into question the advisability of using traditional monetary instruments and points to the need to develop more comprehensive approaches to economic policy.

Instead, the current situation creates risks for economic recovery. Rather than stimulating investment and modernization of production, significant financial resources are effectively withdrawn from economic circulation through the current NBU policy, ostensibly aimed at fighting inflation. This leads to stagnation in lending and falling real incomes, and will have long-term negative consequences for the country's development.

Confirmation of the ineffectiveness of economic policy was the cumulative inflation index, which for the period 2022-2024 reached 147%. This indicator reflects the depth of the economic crisis and its impact on public welfare through a significant reduction in real incomes and purchasing power. The NBU's forecast for inflation to decrease to 8.4% by the end of 2025 seems unreasonably optimistic, especially considering the rise in fuel prices. This creates a multiplicative effect through increased transport costs across all sectors of the economy.

Industrial inflation, which showed significant acceleration in the second half of 2024 (27.6% for the year), deserves special attention. This process is driven by a complex of interrelated factors. First of all, there was a significant increase in electricity tariffs for industrial consumers, which led to an increase in production costs across virtually all sectors of the economy. Additional pressure was created by rising food raw material costs, which particularly affected the food industry and related sectors.

Industrial inflation is also affected by rising wage levels, particularly due to shortages of qualified personnel, forcing enterprises to increase wages to retain employees. An increased tax burden, including an increase in the military levy at the end of 2024, created additional pressure on businesses. All these factors form a classic cost spiral: companies are forced to raise prices to maintain profitability, which in turn provokes a new round of inflation.

Similarly, consumer inflation is rising, particularly the price dynamics of socially important products. Bread shows a steady upward trend (plus 2.1% in January and 20.3% over the year). Meanwhile, manufacturers warn of further price increases of 5-10% in the coming months due to rising flour costs and production expenses. Cheeses and dairy products also show significant price increases – by 17.5% year-on-year, creating additional pressure on family budgets.

The situation with the prices of medicines and medical services, as well as other basic food products, is particularly acute. In the structure of price increases, production costs and export orientation of producers play a significant role. A telling example is sunflower oil, where rising export prices (from $1,269 to $1,310 per ton during January-February 2025) led to a significant price increase in the domestic market – by 2.8% in January and 25.4% year-on-year. A similar situation is observed in other export-oriented segments of the food market, where domestic prices increasingly correlate with world prices, despite the significantly lower purchasing power of Ukrainian consumers. As a result, prices in Poland or Spain for basic products may be lower despite the significant difference in income.

Because the structure of the consumer basket for different social groups in Ukraine differs significantly – for low-income segments of the population, the share of expenditures on food, medicines, and utilities is much higher than the country average. Considering that these categories of goods and services show the largest price increases, real inflation for this population group significantly exceeds official indicators.

To understand the illogicality of the current inflation situation – the scale of international support for Ukraine during 2022-2025 created unprecedented opportunities for economic transformation, which, however, remained unused. According to the Kiel Institute for the World Economy, the total volume of international aid over three years of war reached 267 billion euros, of which 118 billion euros (44%) was direct financial support. The expected inflow of an additional $38.4 billion in 2025 creates opportunities for structural reforms, but current macroeconomic indicators resulting from the actions of the NBU and the government indicate a deepening of systemic problems, especially in the context of a possible review of international support due to policy changes in the United States. Inefficient use of available resources and the absence of systemic reforms create risks of preserving the structural problems of the Ukrainian economy, which could significantly complicate the post-war recovery process.

The situation is complicated by the fact that the current inflation rate (12.9%) has already exceeded the average yield of hryvnia deposits (12.52% per annum, and after taxation – only 9.64%). This creates a vicious circle: trying to curb inflation by raising the key rate to 14.5%, the NBU is simultaneously forced to spend foreign exchange reserves to support the exchange rate, which in conditions of significant trade deficit and high budget expenditures appears increasingly inefficient. During December 2024 - January 2025, the NBU spent a record $9 billion to support the hryvnia exchange rate, with the volume of interventions in December alone reaching a historic maximum of $5.28 billion.

Analysis of the situation indicates the need for a radical revision of approaches to monetary policy. Instead of a conservative policy of high interest rates, it is necessary to focus on stimulating the real sector of the economy. This may include implementing targeted refinancing programs for priority industries, creating mechanisms to compensate for increased energy tariffs for industry, and developing effective support programs for small and medium-sized businesses.

Reforming the financial sector requires special attention. It is necessary to create conditions for reorienting the banking system from operations with deposit certificates to lending to the real sector. This can be achieved through the implementation of differentiated reserve requirements, creating incentives for long-term lending, and developing risk hedging instruments.

Separately, it is worth noting the problem of maintaining high production costs. In the face of rising global energy prices and the need to modernize production facilities, enterprises need access to long-term financing at reasonable rates. Without solving this problem, it is difficult to expect a significant reduction in inflationary pressure from the production sector. In anticipation of further increases in energy prices, this becomes a key factor in the competitiveness of Ukrainian enterprises and the ability to restrain price growth in the long term.

Without significant changes in approaches to monetary policy, there is a high risk of further deepening of economic stagnation and growth of social inequality. Due to the continuation of Russia's aggression and the need to rebuild the economy, such a scenario could lead to long-term negative consequences that would be difficult to overcome even with significant international support.

Thus, the NBU and the government need a more flexible and comprehensive approach to economic policy that would take into account the specifics of the current crisis and the need to stimulate economic growth while simultaneously protecting the most vulnerable segments of the population from inflationary pressure. Only such an approach will effectively use the available opportunities of international support for real improvement of the economic situation in the country.