Danyliuk dismissed as Ukraine finance minister

Ukraine’s parliament voted on June 7 to support the
prime minister’s request to dismiss Finance Minister Alexander Danyliuk, with
254 MPs votes in favor (out of 226 needed). As a result of the dismissal,
Oksana Markarova, Danyliuk’s first deputy, automatically became acting finance
minister.

Recall, PM Volodymyr Groysman submitted minister’s dismissal request
to parliament a day before, commenting that Danyliuk cannot be a member of the
Cabinet any more. The conflict between Groysman and Danyliuk intensified two
weeks ago after the PM’s refusal to appoint a second deputy finance Minister at
Danyliuk’s request. Afterwards, the Cabinet approved resolutions (initiated by
PM) that diminish the role of the Finance Ministry in the Cabinet’s decision-making
process. The conflict further escalated after a letter
Danyliuk sent to international ambassadors was leaked in which he accused
Groysman and Poroshenko of interfering in the work of MinFin and the State
Fiscal Service.

At his June 7 briefing, IMF spokesman Gerry Rice
referred to Danyliuk as “a strong supporter of reforms,” declining to comment
on his resignation. “We do not comment on personnel issues,” he said. At the
same time, he stressed that it’s important for the Finance Ministry to “retain
its central and crucial role in fiscal policy.”

Alexander Paraschiy: Danyliuk’s
dismissal as was an expected event, given that he had become an inconvenient
figure for authorities in both the president’s and prime minister’s political
circles. The IMF’s comments confirm our view that the dismissal won’t spoil
Ukraine’s talks with the Fund, so we expect that Markarova will smoothly
continue negotiations with the IMF on MinFin’s behalf. But it’s not clear
whether the government will listen to the IMF, which is concerned about the
diminishing role of MinFin in fiscal policy, and whether the IMF will do
anything about that.

We see heightened risks for MinFin’s inability to
resist possible populist decisions of the government (ahead of the election season),
which may be harmful for fiscal policy. It’s possible the IMF will take into
account the looming threats to a balanced 2019 budget when making the decision
on the fifth tranche, and even make some last-minute demands in light of these
MinFin developments.