(Bloomberg) -- Ukraine finally confirmed the appointment of
a new central bank chief on Thursday, almost a year after his
predecessor quit, in a move that could help unfreeze the eastern
European nation’s $17.5 billion bailout.
Parliament approved Yakiv Smoliy, acting governor since the
resignation of Valeriya Gontareva, as permanent head of the
National Bank of Ukraine. His candidacy was put forward by
President Petro Poroshenko, who’s faced criticism for leaving
the post vacant for so long.
Yakiv Smoliy shows new hryvnia coins that entered circulation on Wednesday. On Thursday, his nomination as Governor of the Bank of Ukraine was approved by the Rada. (UNIAN/Vladimir Gontar)
“The first strategic goal is for the National Bank of
Ukraine to continue focusing its efforts on reaching and
maintaining low and stable inflation,” Smoliy told lawmakers
before the vote. “Let me underscore that we will bar fiscal
dominance over monetary policy at the expense of Ukrainians’
Leadership at the central bank has become more important
because of slowing economic growth and delays in aid from the
International Monetary Fund. Smoliy follows Gontareva, seen as
one of the country’s most successful reformers who quit after
complaining of waning appetite among Ukrainian officials to
revamp the ex-Soviet economy.
Aside from focusing on inflation, Smoliy said a key task is
also to defend the central bank’s independence, and he pledged
to keep the financial system free from political influence and
safeguard the market’s interests. Ukraine holds presidential and
parliamentary elections in 2019.
Filling the central bank post had been one of several
conditions for Ukraine to receive the next slice of its rescue
loan from the IMF. Others include approving a bill to create an
anti-corruption court, raising natural gas tariffs for
households and amending a pensions overhaul.
While Poroshenko has said Ukraine may get the next tranche
of financial assistance as early as April, no date has been set
for a visit by the Washington-based lender to assess progress.
--With assistance from Kateryna Choursina.
To contact the reporter on this story:
Daryna Krasnolutska in Kiev at firstname.lastname@example.org;
The IMF has welcomed the appointment.
In of itself this is not going to kick start the IMF program. The Poroshenko administration promised IMF Managing Director Lagarde back in April 2017 the appointment of a suitable candidate as governor (at that time supposedly Raffeisen Bank Aval chairman Volodymyr Lavrenchuk). But this removes one potential sore spot in the relationship.
Still agreement over the Anti Corruption Court, gas price hikes, and now the new difficulty around government plans to reform corporate income tax, which the IMF seems to have expressed objections over. I sense the ACC is the real bug bear.
Likely we will get a version of the ACC passed at second reading, but whether that will be IMF/Venice Commission compliant, that is the question. I think any version passed will likely fall short of the mark. Then the Ukrainian side will hope for a hall pass from the IMF -- I doubt it will come -- and on the back of this will look to finance themselves from the market.
Timothy Ash is senior sovereign strategist for emerging markets at BlueBay Asset Management in London and a member of the UBJ Editorial Board.
Posted March 15, 2018