Ukraine central bank governor’s resignation could jeopardise EU loan, Commission says

Facade of the National Bank of Ukraine [Pavelskyi Vladyslav/Shhutterstock]

The EU’s €1.2 billion macro-financial assistance (MFA) programme for Ukraine “could be jeopardised” should the International Monetary Fund (IMF) consider its programme with  Kyiv “off-track” because of the recent resignation of the country’s central bank governor, a Commission spokesperson told EURACTIV.

Central bank governor Yakiv Smolii handed in his resignation on Wednesday (1 July), citing “systematic political pressure”, in a move that prompted worried responses from Western partners and cast a shadow on the country’s badly-needed new IMF loan programme.

“The existence of – and adherence to – an IMF programme is an essential precondition for disbursements under MFA programmes,” the Commission spokesperson said.

“The Commission will await the outcome of the IMF’s assessment of the situation,” the spokesperson added.

The first $2.1 billion tranche of the new 1.5-year, $5 billion IMF “stand-by arrangement” loan, needed to prop up Ukraine’s developing economy amid the coronavirus storm, was disbursed last month but future instalments will be subject to reviews, the first of which may come in September, an IMF spokesperson said last month.

In a statement announcing his resignation, Smolli said that “for a long time, the National Bank of Ukraine (NBU) has been under systematic political pressure”.

“This makes it impossible for me, as the Governor, to effectively carry out my duties as the head of the National Bank of Ukraine and interact with other government agencies.”

“Let it be a warning for attempts to undermine institutional independence of the central bank,” he wrote on social media.


Ukraine's central bank governor resigns, citing 'systematic political pressure'

Ukraine’s central bank governor handed in his resignation on Wednesday (1 July) prompting worried responses from Western partners and casting a shadow on the country’s new IMF loan program.

An IMF spokesperson said on Thursday (2 July) that under Smolii’s monetary leadership, “Ukraine has made important strides in achieving price stability, amply demonstrating that an independent central bank is a key element of modern macroeconomic policymaking”.

“That is why the independence of the NBU is at the centre of Ukraine’s Fund-supported programme, and why it must be maintained under his successor,” the spokesperson said.

The EU’s so-called “macro-financial assistance,” usually a complement to the IMF support, is given in the form of highly favourable loans designed to improve the macroeconomic stability of countries.

According to the Commission spokesperson, there has been good progress in the negotiations on the specific policy measures attached to the EU’s MFA programme for Ukraine.

The reforms will centre on four areas of public finance management, governance and rule of law, improving the business climate, and sectoral policies and state-owned enterprises.

The Commission stated in May that it will be ready to disburse the first instalment of this new MFA as swiftly as possible after concluding a memorandum of understanding with Ukraine, which will include the Ukrainian authorities’ commitment to central bank independence, the spokesperson confirmed.

[Edited by Zoran Radosavljevic]

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