KYIV (Reuters) – Ukraine’s Central Bank Governor Yakiv Smoliy unexpectedly submitted his resignation on Wednesday, citing “systematic political pressure” on the bank’s activities and attempts to curb its independence.
If the resignation is accepted by President Volodymyr Zelenskiy, the decision could derail a $5 billion loan programme that Ukraine agreed last month with the International Monetary Fund to fight a sharp economic slump, which is conditional on the central bank staying free of political meddling.
Zelenskiy’s office in a statement gave reassurances that safeguarding the central bank’s independence remained its “unconditional priority”, but did not say whether Zelenskiy would accept the resignation or who a replacement might be.
The IMF did not immediately comment. The ambassadors of the Group of Seven countries said that “to undermine this crucial institution would be a big step back and jeopardize the credibility of and support for Ukraine’s reforms.”
Under Smoliy’s leadership, the National Bank of Ukraine (NBU) has kept its reputation among investors as a respected institution that brought down inflation to single digits while resisting calls for faster interest rate cuts.
Ukraine’s economy is expected to contract by around 5% this year because of the novel coronavirus pandemic. The central bank board in a separate statement said it would continue working to preserve macro-financial stability.
The central bank has previously complained of being subjected to pressure, including over its decision in 2016 to nationalise Ukraine’s largest lender, PrivatBank, which was formerly co-owned by businessman Ihor Kolomoisky, a backer of Zelenskiy.
Zelenskiy has denied any favouritism towards Kolomoisky and publicly expressed support for the central bank’s independence.
“I’ve submitted my resignation appeal to the President. This decision has been taken as an answer to systematic political pressure that denied fulfilment of my duties as the Governor,” Smoliy wrote on Twitter.
“Let it be a warning for attempts to undermine institutional independence of the central bank.”
Smoliy submitted his resignation on the same day as Ukraine raised $1.75 billion in new Eurobond issuance, on the back of securing the IMF deal.
“The NBU is the most trusted institution amongst foreign institutional investors. Terrible news for Ukraine,” said Timothy Ash at Blue Bay Asset Management. “The future of the IMF programme must be in doubt. Who succeeds Smoliy will be critical”.
(Editing by Grant McCool)