Daily Insight-New government formation pending; domestic liquidity up on NBU; UAH real TWI down on euro optimism

Last Friday, PM Azarov held his first meeting of the Cabinet of Ministers at 11:00am as promised the day of his approval as prime minister by 252 MPs inparliament. He did not announce who joins with him into the Cabinet of Ministers, signaling that appointments are postponed, likely due to ongoing talks inside the ruling majority of Party of Regions and Communist Party as well as between President Yanukovych\'s administration and some non-affiliated MPs. However, one statement made by Azarov on Friday morning warrants attention: he acknowledged that in 2013 authorities must repay a US$6bn of loan to the IMF. Hence, this could be a sign that authorities must resolve this issue, most optimally by refinancing through a new programme with the IMF. PM Azarov had no further statements on Friday. However, later on, while appearing in several TV news programs over the weekend, PM Azarov was appeared to deny everything. He dismissed a question about a possible increase of the utilities\' tariff for households as improper, firing back that his government would authorize no increases. Further on, in reference to supporting the local currency, he did not explicitly mention that he would require that the NBU further adhere to an exchange rate policy that pegs the UAH to the USD, he sounded in such aa way that left no doubt he was not thinking about allowing any reform of monetary policy. He then contradicted himself by speaking for a long time about preserving the stability of the currency and making a public promise to reinvigorate economic activity. He was referring to the NBU to revive bank lending in the country (which nearly halted due to high interest rates).
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