Ukraine central bank chief abruptly resigns, citing political pressure

If the resignation is accepted by President Volodymyr Zelenskiy, the decision could derail a $5 billion loan programme that Ukraine agreed last month with the International Monetary Fund to fight a sharp economic slump, which is conditional on the central bank staying free of political meddling.

The IMF and Zelenskiy’s office did not immediately comment.

Under Smoliy’s leadership, the National Bank of Ukraine (NBU) has kept its reputation among investors as a respected institution that brought down inflation to single digits while resisting calls for faster interest rate cuts.

Ukraine’s economy is expected to contract by around 5% this year because of the novel coronavirus pandemic. The central bank board in a separate statement said it would continue working to preserve macro-financial stability.

The central bank has previously complained of being subjected to pressure, including over its decision in 2016 to nationalise Ukraine’s largest lender, PrivatBank, which was formerly co-owned by a backer of Zelenskiy.

“I’ve submitted my resignation appeal to the President. This decision has been taken as an answer to systematic political pressure that denied fulfillment of my duties as the Governor,” Smoliy wrote on Twitter.

“Let it be a warning for attempts to undermine institutional independence of the central bank.”

Smoliy submitting his resignation came on the same day as Ukraine raised $1.75 billion in new Eurobond issuance, on the back of securing the IMF deal. It must first be accepted by Zelenskiy and then approved by parliament.

“The NBU is the most trusted institution amongst foreign institutional investors. Terrible news for Ukraine,” said Timothy Ash at Blue Bay Asset Management. “The future of the IMF programme must be in doubt. Who succeeds Smoliy will be critical”.