IMF head urges Zelensky to preserve NBU independence

IMF Managing Director Kristalina Georgieva placed a
call with President Zelensky on July 14 to discuss her “concerns about the
pressures being put on the National Bank of Ukraine (NBU).” According to
the IMF’s press release of the same day, Georgieva stated, “It is in the
interest of Ukraine to preserve the independence of the NBU and it is also a
requirement under the current IMF-supported program”. She urged President
Zelensky “to stay the course of sound monetary and financial policies –
those are key to stronger investment and inclusive growth.”

Commenting on the call, the President’s Office said in
a statement that Zelensky assured Georgieva of “Ukraine’s firm intention to
continue cooperation with the IMF.” Zelensky also discussed the process of
selecting a new NBU governor, assuring her that the new head will be “an
independent technocrat who will continue the independent policy of the NBU.” He
said he will submit to parliament a candidate for NBU governor by the end of
this week. Recall, in early July, Zelensky and parliament accepted the
resignation of NBU head Yakiv Smoliy, who attributed his decision to resign to political pressure on the NBU.

A parliamentary vote for a new NBU head has been
scheduled for July 17, when the president is likely to announce his nomination,
the liga.net news site reported on July 14, citing its sources in the Rada.
Meanwhile, the short list of candidates is not up for public discussion,
liga.net wrote, also offering its broad list of nine possible candidates. It
includes five people who fall under the definition of “independent technocrats”
who were reported to have been recently contacted by the president’s office:
Yuriy Gorodnichenko (professor at University of California, Berkeley), 
Andrei Kirilenko (associate professor at Cambridge University), Sergei Guriev
(former chief economist of the EBRD), Dmytro Sologub (deputy NBU governor) and
Volodymyr Lavrenchuk (former CEO of Raiffeisen Bank Aval).

The other group of potential candidates consists of
those likely to be ready to “narrow” the authority of the NBU, liga.net
alleges, including: Kyrylo Shevchenko (CEO of state-controlled Ukrgazbank), two
former top officials of the NBU Sergiy Kruglyk and Olena Scherbakova, and the
head of the NBU Council, Bohdan Danylyshyn.

Meanwhile, People’s Servant Parliamentary Faction Head
David Arakhamia told Interfax-Ukraine on July 14 that one of the faction’s
members is being considered as a candidate to lead the NBU. He declined to
comment further, only assuring the public that the candidate is not Danylo
Hetmantsev, the head of parliamentary finance committee.

Alexander Paraschiy: It’s hard
to predict whom Zelensky will nominate on Friday, but it’s apparent that the
likelihood of an “independent technocrat” leading the NBU is not high. First,
an independent figure won’t have enough votes in parliament, where special
interests dominate. Second, such an appointment does not correspond to the
logic of events (why would they have let “independent” Smoliy go just to
appoint another “independent” person instead?).

Still, there is a chance that the recent pressure from
the IMF and international financial markets placed on the government (recall,
Ukraine had to cancel a Eurobond placement due to Smoliy’s
resignation) may lead to Zelensky having learned
his lesson and realize the need in appointing an independent national bank
head.

We see this situation as very similar to when Zelensky
had to approve the banking resolution bill (the so-called anti-Kolomoisky law).
Zelensky will satisfy the demands of his main political sponsor most of the
time, unless it interferes with the nation’s survival (the bill was needed for
the new IMF loan). In this case, Zelensky should come to the conclusion that an
independent NBU head is necessary for Ukraine’s economic survival.