Ukraine’s government has decided to pause a planned $1.75 billion Eurobond sale in the wake of the resignation of the head of the country’s central bank.
Finance Minister Serhiy Marchenko announced the pause on July 2, saying the decision came after “a long night of negotiations with investors” following word that National Bank of Ukraine (NBU) head Yakiv Smoliy had stepped down complaining of “systematic political pressure.”
“We are ready to pause and then decide what to do next,” Marchenko said, insisting that there was no threat to Ukraine’s financial stability.
In the wake of the resignation, Ukraine’s currency, the hryvnya, fell to its lowest level against the U.S. dollar since April.
Smoliy’s resignation could also endanger a pending $5 billion loan from the International Monetary Fund (IMF) aimed at helping Ukraine cope with the fallout from the global coronavirus pandemic.
The move fueled concerns about the government’s commitment to its reform agenda under President Volodymyr Zelenskiy, who has pledged to combat corruption.
Zelenskiy has accepted Smoliy’s resignation, meaning that parliament must now vote to formally dismiss him.
In a statement on July 2, European Union spokesman Peter Stano said that “establishing a strong and independent National Bank has been a fundamental achievement for Ukraine, and remains crucial to the country’s future success.”
He added that Smoliy’s resignation “against the backdrop of alleged political pressure sends a worrying signal.”
The IMF also urged Ukraine to maintain the bank’s independence under Smoliy’s successor.
The NBU has previously complained of being subjected to political pressure, including over its 2016 decision to nationalize Ukraine’s largest lender, PrivatBank. That bank was previously co-owned by billionaire Ihor Kolomoyskiy, who has close ties to Zelenskiy.
Smoliy has also complained in recent months about alleged pressure to lower interest rates and aid exporters by keeping the hyrvnya weak.
Smoliy had headed the bank since 2018 and under his leadership the bank developed its reputation among investors and earned plaudits for taming inflation.