Ukraine Central Banker Exits Chiding Rate Demands, Protests
Ukraine Central Banker Exits Chiding Rate Demands, Protests
(Bloomberg) -- As lawmakers approved his resignation, Ukraine’s outgoing central bank chief slammed them over the political pressure that prompted his decision to quit.
Governor Yakiv Smoliy rattled markets by suddenly stepping down late Wednesday following a meeting with President Volodymyr Zelenskiy, who’s been among officials complaining of high interest rates and the strength of the national currency.
“In the last year, there were meetings that included government officials and the president where we were urged to flood the economy with money, cancel the basic principles of the banking system and set a hryvnia exchange rate that would be favorable for exporters,” Smoliy told parliament Friday.
“This is a protest, a signal, a warning, a red line,” he said. “By my resignation, I seek to prevent further attempts to undermine the institutional basis of the central bank.”
His decision to quit forced the Finance Ministry to cancel a $1.75 billion Eurobond sale on Thursday. It’s also called into question the reform credentials of Zelenskiy, who shot to power in 2019 promising a new start and a crackdown on corruption after years of murky post-Soviet politics.
Lawmakers in Kyiv voted 286-43 in favor of Smoliy’s exit, which has raised concern among investors and foreign donors. The International Monetary Fund, which agreed on $5 billion of aid for Ukraine last month, has said it will be closely watching who replaces the governor.
Zelenskiy has vowed to respect central-bank independence in naming a successor, even as one of his aides played down the pressure Smoliy described. Much of the tension is linked to efforts to annul the 2016 nationalization of Ukraine’s biggest bank, which was seized after a fraud of more than $5 billion was discovered. Billionaire former owner Igor Kolomoisky, who denies wrongdoing, is challenging the takeover in local courts, while the lender’s new management is pursuing damages from him in foreign jurisdictions.
“During the last year, there have been paid rallies at the central bank’s office involving lawmakers that are sitting in this hall,” Smoliy said. “My house and the houses of my deputies have been blocked by protesters for a month. It was a full year of systematic pressure.”
Smoliy, who joined the bank in 2014 after Ukraine toppled its Kremlin-backed leader, is credited for helping tame to inflation, keep the hryvnia stable through the pandemic and negotiate the recent IMF deal. He oversaw a reduction in benchmark borrowing costs to a post-communist low last month.
The rest of the bank’s board, who are so far remainingin their positions, urged the appointment of a technocratic governor with a good reputation.
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