IMF urges Ukraine to keep central bank independent as governor's exit rattles market

The International Monetary Fund urged Ukraine on Thursday to maintain the independence of the central bank after Governor Yakiv Smoliy unexpectedly resigned, citing "systematic political pressure". The negative fallout from Smoliy's resignation prompted the finance ministry to say it was not going ahead with a planned offering of dollar-denominated Eurobonds.

The International Monetary Fund urged Ukraine on Thursday to maintain the independence of the central bank after Governor Yakiv Smoliy unexpectedly resigned, citing "systematic political pressure".

The negative fallout from Smoliy's resignation prompted the finance ministry to say it was not going ahead with a planned offering of dollar-denominated Eurobonds. Smoliy's resignation, if accepted by President Volodymyr Zelenskiy, risks derailing a $5 billion deal agreed with the IMF last month to fight an economic slump caused by the COVID-19 pandemic.

Despite reassurances from Zelenskiy's office on Wednesday, Smoliy's resignation sent sovereign bonds down by more than two cents and the local hryvnia currency down to its lowest level since April against the dollar. "Under his leadership, Ukraine has made important strides in achieving price stability, amply demonstrating that an independent central bank is a key element of modern macroeconomic policymaking," an IMF spokesman said in a statement.

"That is why the independence of the NBU is at the center of Ukraine's Fund-supported program, and why it must be maintained under his successor."