KIEV, July 2 – A sharp disagreement over 2008’s inflation forecast led to a clash between the government and the central bank on Wednesday, ending inconclusively a five-hour meeting at President Viktor Yushchenko’s office.

Prime Minister Yulia Tymoshenko and National Bank of Ukraine Governor Volodymyr Stelmakh, along with the country’s top economic policy decision makers, joined the meeting in the latest attempt to agree on inflation.

But the meeting failed to reach consensus as the NBU predicted a much greater rate of inflation, assuming the government continues to increase spending on social needs.

“What we have as of today are two non-agreed scenarios concerning the economy for the second half of 2008: One from the government and the other one from the NBU,” Oleksandr Shlapak, Yushchenko’s top economic aide, said.

“That’s why we don’t have budget amendments and monetary policy that would be in agreement,” Shlapak said. “We don’t have any significant changes in the NBU’s monetary and exchange rate policies, and the president has toughly criticized the governor for this.”

The meeting ended inconclusively with ministers refusing to comment. The NBU, for the first time in years, has failed to issue its official exchange rate to be in effect on Thursday.

At the core of the disagreement was Tymoshenko’s insistence that Ukraine’s consumer inflation will not exceed 15.3% in 2008, a revision from 9.6% forecast earlier this year. Ukraine’s consumer prices rose 31.1% between May and May 2007.

Yushchenko two weeks ago criticized the new figure as too optimistic and demanded the NBU to put its stamp of approval on it.

But Stelmakh on Wednesday refused to back the figure assuming that Tymoshenko had been planning to spend an extra 30 billion hryvnias as part of planned budget amendments.

Stelmakh “is ready to support the forecast indicators only under condition that 2008 budget spending will not change,” Shlapak said. “If it does change, as the government is suggesting - by 30 billion hryvnias, then the NBU does not accept [the forecast of] producer price index, consumer prices index, real GDP, nominal GDP and other indicators.”

The failure to agree on the indicators delays implementation of joint policy from the government and from the NBU for curbing inflation that has been threatening to slow economic growth.

“The country cannot have two different official macroeconomic scenarios: when budget amendments are drafted based on one [scenario] and monetary policy is based on the other one,” Yushchenko said at the meeting, according to his spokeswoman.

Yushchenko again repeated his calls for the NBU to come up with a declaration of the exchange rate policy for the rest of the year, such as announcing new currency trading band.

The policy of keeping the hryvnia within the band de-facto ended on May 21, when the NBU had suddenly allowed the hryvnia to appreciate against the U.S. dollar by 4% overnight and beyond the level it had previously pledged to defend.

“The market needs to get signals of confidence that the budget, economic and monetary policies are harmonized and that stability is ahead,” Yushchenko said. (tl/ez)