Ukraine parliament appoints Smoliy as central bank governor

Ukraine’s lawmakers voted on March 15 to dismiss Valeriya
Gontareva from her position as governor of the National Bank (NBU) and elected
Yakiv Smoliy as her replacement. Gontareva’s dismissal was supported by an
overwhelming majority of 342 votes, while 247 MPs voted for Smoliy’s
appointment. Smoliy has been acting NBU head since May 2017, when Gontareva
submitted a resignation request and went on indefinite leave, still remaining
as de jure governor.

In his address to parliament, Smoliy listed his six
priorities in the position of NBU governor: mid-term inflation of about 5% +/-
1pp, a “sound and competitive” banking system, fast recovery of lending
activity, an efficient model of banking regulation, foreign currency market
deregulation and international integration of Ukraine’s financial system. 

Alexander Paraschiy: This
long-awaited appointment boosts Ukraine’s international image and puts Ukraine
closer to a new loan deal with the IMF, which can only be signed by a
permanently appointed NBU head. On the domestic market, we do not expect any
changes in the central bank’s policy. That means we see the NBU will remain
among Ukraine’s leaders in reforms.

Among the most important tasks of the NBU for the near
future are protecting the rights of creditors and assisting in resolving bad
debts. Another important task is currency liberalization and further global
integration of the Ukrainian financial system. The key uncertainty remains who
will take the vacant position in NBU’s management board once Gontareva
officially steps down and Smoliy is promoted. 

Smoliy’s appointment is in line with our earlier
expectations that it should happen this spring, while we were skeptical that it would be as early as this week. This
was made possible after politicians finally reached compromise on another key
post, electing MP Liudmyla Denysova as human rights ombudsman. Denysova’s
candidacy was lobbied by the People’s Front faction, whose members control the
Internal Affairs and Justice ministries, the two key bodies responsible for
arresting criminal suspects and their detention in prison, which also happen to
be the most critical areas under the ombudsman’s supervision. Numerous civic
society officials see a conflict of interest in such appointments, but such is
the price the authorities had to pay to get a new NBU head.