Ukraine: NBU governor resigns amid scandal, Oct 2022

On October 4th, Kyrylo Shevchenko, the governor of the National Bank of Ukraine (NBU, the central bank), announced his resignation, which was formalised by the finance committee of the Verkhovna Rada (parliament) shortly after. Mr Shevchenko has been in the post since July 2020. Volodymyr Zelenskyi, the Ukrainian president, proposed Andriy Pishnyi, another career banker, to replace him, and this was confirmed by the Rada on October 7th.

The consolidation and strengthening of the banking system in 2014-16 under the leadership of Valeriya Hontareva was one of the main policy achievements of the immediate post-Euromaidan era. Since then, however, as in many other areas of reform, there has been some back-tracking, with both Hontareva and her successor, Yakiv Smoliy, subjected to political pressure by vested business-political interests, raising concerns about the bank’s independence.

In his resignation statement, Mr Shevchenko, 49, said that he was stepping down as NBU governor owing to health concerns. He stressed the positive role of the NBU during his tenure in preventing destabilisation of the financial system and keeping the banking sector operational amid the onset of full-scale war with Russia. In fact, by restraining the scale of capital outflows, and preventing a collapse of international reserves and the exchange rate, the NBU’s role has been vital to the continuation of domestic economic activity, itself necessary to support the conduct large-scale military operations.   

However, contradicting Mr Shevchenko’s version of events, the National Anti-Corruption Bureau of Ukraine (NABU) and the Specialised Anti-Corruption Prosecutor’s Office (SAP), the two key bodies within Ukraine’s legal system charged with tackling graft in public life, have since said that Mr Shevchenko had been informed of suspicion of his involvement in a long-running embezzlement scheme at Ukrgasbank, one of the largest Ukrainian banks, which is almost wholly state-owned.

In particular, according to these bodies, by means of access to the service contracts of large private and public corporations, between late 2014 and 2020, the management at Ukrgasbank, where Mr Shevchenko was chair before he became NBU governor, paid HRN206m (around US$7bn-8bn at the average exchange rate over the period) to 52 agents for attracting big clients to the bank, when no such agents existed and no such services had been provided.

On the one hand, the resignation of Mr Shevchenko could raise concerns in financial markets about the dangers of political interference in the NBU, just as the military conflict with Russia seems to have entered its most dangerous phase. On the other hand, a credible central bank led by a credible top management team remains essential, both to maintain the stability of the banking sector—which in Ukraine, as in many emerging markets, makes up the bulk of the financial sector—in wartime, and to steer the Ukrainian economy successfully towards recovery, post-war.

 

Comments

Post a Comment

Popular posts from this blog

Ukraine: The politics of institutional reform: Zelenskyi’s “de-oligarchisation” drive, Dec 2021

The president's “de-oligarchisation” drive addresses issues vital for Ukraine’s development, but is unlikely to produce lasting change (December 2021, for the EIU) The president’s claim that a Russian-linked coup is being organised against him may be part of a wider domestic political struggle set off by his “de-oligarchisation” drive.  De-oligarchisation addresses the key developmental issue facing Ukraine. This is that, by restricting political and economic competition, the collusive, behind-the-scenes politics of Ukrainian elites has acted as a fetter on economic growth, helping to explain the country’s low living standards. Concerns have been raised that the policy could be applied selectively to damage the president’s political rivals.  The measures may be too limited to produce lasting change. Moreover, Zelenskyi appears to lack both the resources and the durable domestic political alliances that would be required to affect a long-term transformation of national governan...
Read more

Falling between two stools

A review of Marko Bojcun’s Towards a Political Economy of Ukraine: Selected Essays, 1990-2015; Ukrainian Voices, vol 3; Ibidem-Press, Stuttgart. A. The history of post-Soviet Ukraine could be written as that of a succession of self-serving political leaderships, and of inspiring but failed popular protests, resulting in chronic economic underperformance that has left the country’s dwindling population among the poorest in Europe. A glance at IMF data, for example, shows the country vying for bottom place in the European income rankings with Moldova. In these essays, written close on the events they analyse, Marko Bojcun reminds us that this need not have been the case, and that other trajectories at times seemed possible. One example is to be found in an article from 2001, in which the prospect of Russia’s European integration is still in the air, just about, whereas from the vantage point of today, this is almost unthinkable. B. The collection covers key waypoints in the politic...
Read more

Ukraine: EU begins to disburse next tranche of financial assistance, Oct 2022

In late September, EU bodies approved an additional €5bn in macro-financial assistance (MFA) to Ukraine, and in early October, Ursula von der Leyen, the president of the European Commission, announced that the first payment, of €2bn, would be made shortly, with the rest to follow by the end of 2022. This is the second instalment of a €9bn package first announced in May, and follows the delivery of €1bn in early August. It is designed to address the substantial budgetary shortfalls facing the Ukrainian government linked to the ongoing war with Russia, which has closed off access to capital markets, but led also to agreements with creditors for delays in debt repayments. The latest EU funding comes in the form of “highly concessionary” long-term loans—that is, at a low interest rate, but still adding to the stock of public debt. The form of the final €3bn of the facility—whether it will be offered as a loan or a grant—has yet to be decided among the 27 EU member states. As the EU Commiss...
Read more