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Ukraine's new central bank governor promises to maintain independence, rate cuts

07/20/2020 | 12:27pm EST
Head of state-run Ukrgasbank Shevchenko attends a session of parliament in Kyiv

Ukraine's new central bank governor promised on Monday to maintain the independence of the central bank and cooperation with the International Monetary Fund while continuing to cut interest rates.

Governor Kyrylo Shevchenko's words and emphasis on continuity may have been intended to reassure the market after the turbulent exit of his predecessor rattled investors and prompted the government to postpone a Eurobond sale.

He was installed last week after his predecessor, Yakiv Smoliy, quit, citing political pressure. It came a month after Ukraine had secured a new $5 billion IMF deal, contingent on the central bank remaining independent, to fight a sharp economic slump caused by the novel coronavirus pandemic.

"The National Bank will remain an independent institution," Shevchenko said, speaking alongside President Volodymyr Zelenskiy.

"The NBU (National Bank of Ukraine) should continue the policy of lowering the discount rate, which, as a result, will lead to cheaper loans for the final borrower," he added.

Zelenskiy also said the central bank should remain "a pillar of macroeconomic stability," adding: "It is difficult to calculate how many times the thesis that the head of the NBU should be independent was voiced and I, as the president of Ukraine, fully support this."

Speaking again at a separate briefing later, Shevchenko said he saw no delay in Ukraine receiving IMF loans.

He added that the central bank would keep a floating exchange rate and would not allow uncontrolled inflation, but added that restoring the flow of credit was a priority.

The central bank would also not change its policy on PrivatBank, he said. Ukraine's largest lender, PrivatBank was nationalised in 2016 amid allegations by the central bank and the government of shady lending, and the IMF has insisted the nationalisation should not be reversed.

The previous main owners of PrivatBank strongly deny any wrongdoing and have fought a long legal battle to regain ownership of the bank or compensation.

Smoliy resigned at the start of July, complaining the central bank was being pressured to take bad decisions and that its officials were being harassed. Zelenskiy's government has consistently denied trying to exert undue influence over him.

Smoliy had brought interest rates down to their lowest level since independence in 1991, to 6%, but was criticised for not lowering them more quickly. The first rate-setting meeting under Shevchenko's leadership is due on Thursday.

(Writing by Matthias Williams, editing by Larry King and Ken Ferris)

By Natalia Zinets and Pavel Polityuk

© Reuters 2020
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