Key Reformer Under Attack Has a Warning for Ukraine Investors

(Bloomberg) -- The woman who purged Ukraine’s financial industry has a message to investors and the next generation of reformers: proceed with caution.

Valeriya Gontareva, who as central bank governor between 2014 and 2017 led the overhaul that included nationalization of the country’s biggest lender, has come under repeated attack. That may include her being hit by a car in central London last month -- police are still investigating whether it was an accident, she says. Her daughter-in-law’s car was torched in Kyiv and her house outside the Ukrainian capital was destroyed in a fire this week.

The incidents are raising concern about the direction of the former Soviet nation under its new President, Volodymyr Zelenskiy. A former TV comic free from political baggage, he had instilled hope with promises to curb endemic corruption and blunt the influence of powerful businessmen.

Gontareva, currently teaching at the London School of Economics and writing a book about the reforms, says she’s afraid for her family and scared to return to her homeland. Colleagues still at the central bank are similarly “terrified,” she said in an interview in the U.K. capital, where she’s lived since 2018.

“It’s intimidation of all reformers,” Gontareva said Thursday. “This is a very good example of what could happen to them.”

Zelenskiy had been off to a flying start. His market-friendly policies helped turn the hryvnia into this year’s best-performing currency. He sealed a prisoner swap with Russia and has top diplomats talking about the improved chance of peace between the longtime foes. He picked the country’s youngest-ever prime minister and a cabinet widely seen as reformist.

He’s riding high in opinion polls, boasting popularity that tops even Vladimir Putin’s legendary approval rating.

It’s unclear whether recent events will dent his standing. But the aftermath of the fire at Gontareva’s house sparked warnings from Ukraine’s major foreign backers, including the U.S.

The central bank referred to “terror” threatening reformers past and present -- not what officials from the International Monetary Fund want to hear as they visit Kyiv this month to discuss a $5 billion loan.

Zelenskiy has ordered a full investigation. He “understood this is a direct challenge to his authority, to the image of Ukraine,” Alain Pilloux, a vice president at the European Bank for Reconstruction and Development, said after meeting him this week.

An undercurrent is the crescendo of questions about Zelenskiy’s ties to billionaire Igor Kolomoisky, a former owner of Privatbank, which Gontareva helped the state take over in 2016. The tycoon’s TV channel aired Zelenskiy’s comedy shows and backed his presidential run. Both say there’s nothing untoward in their relationship.

Privatbank is back in focus as Kolomoisky challenges its nationalization, which followed the discovery of a $5.6 billion capital shortfall. He denies fraud allegations and says those responsible for nationalizing the lender should be “punished.” A Kolomoisky loyalist in parliament wants to probe Gontareva and her colleagues starting when she took charge in 2014.

It’s becoming commonplace for central banks globally to face outside pressure. But Donald Trump haranguing the Federal Reserve on Twitter is a far cry from some of the things that have happened in Ukraine.

Weeks before Gontareva resigned in 2017, a coffin complete with her photo and a wreath was delivered to her office. More recently, her replacement was threatened with an investigation into his personal finances. He denies wrongdoing.

Under his stewardship, the National Bank of Ukraine won this year’s global transparency award from Central Banker magazine. The economy is also gathering speed, though Gontareva urges caution.

“We could build a new house in the same place, but we’re not ready to do that because it would be burned down again,” she said. “My message for investors: be careful.”

--With assistance from Daryna Krasnolutska.

To contact the reporter on this story: Andrew Langley in London at alangley1@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Balazs Penz

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