Ukraine to Fill Central Bank Governor's Role After 8 Months

(Bloomberg) -- Ukrainian President Petro Poroshenko is set to propose a new central bank governor this week, filling a position that’s been vacant since May as the government struggles to get its $17.5 billion bailout back on track with the International Monetary Fund.

Poroshenko will reveal his nomination in the next two days, with parliament to vote on his proposal on Dec, 21 after listening to a report from the previous governor, Valeriya Gontareva, according to a member of the president’s party. Names to have already been mentioned include Acting Governor Yakiv Smoliy and Volodymyr Lavrenchuk, chief executive officer of Raiffeisen Bank International AG’s local unit.

The central bank has warned that stalled cooperation with the IMF is a threat to Ukraine’s financial stability, particularly with the nation’s recovery from a deep recession losing steam and resurgent inflation prompting a second interest-rate increase in less than two months last week. Gontareva, one of Ukraine’s most respected reformers, helped transform the former Soviet economy after a second pro-European revolution in 10 years.

“The fact that the situation with the central bank governor can be finally resolved is positive,” said Sergey Fursa, a bond trader at investment bank Dragon Capital in Kiev. “Both candidates who’ve been named as potential new governors are respected and will be positively welcomed by the banking community. But the key issue is preserving the independence of the regulator and thus political bargaining over the post isn’t acceptable.”

Having initially strengthened, the hryvnia has lost ground since Gontareva’s departure as IMF transfers were halted. The currency is eastern Europe’s worst performer against the dollar this year with a 2 percent loss. It’s unclear when the next slice of IMF aid will arrive, with issues still to be resolved including household natural gas prices and pension reform.

The central bank’s press office declined to comment on the governor’s nomination. Lavrenchuk didn’t respond to a text message seeking comment on his possible candidacy.

Gontareva tendered her resignation in April, complaining that the owners of shuttered lenders and people she’s accused of money laundering escaped punishment. Her achievements in her post include negotiating a sovereign-debt restructuring, maintaining bailout disbursements and cleaning up the banking industry.

Poroshenko’s parliamentary group will discuss the candidate on Thursday morning, after the nomination is made, group head Ihor Kononenko said in televised remarks. Another group member, Vadym Denysenko, said Yakiv Smoliy is the only possible candidate.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net, Kateryna Choursina in Kiev at kchoursina@bloomberg.net.

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andrew Langley, Paul Abelsky

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