July 14, 2020 / 7:44 PM / 24 days ago

UPDATE 1-IMF leader tells Ukraine's president to keep central bank independent

(Recasts, adds background, Ukraine statement)

WASHINGTON, July 14 (Reuters) - The International Monetary Fund on Tuesday appealed directly to Ukraine’s president to maintain the independence of the country’s central bank after its governor quit July 1, complaining of “systematic political pressure.”

The IMF’s managing director, Kristalina Georgieva, issued a statement about what she called an “open discussion” with Ukrainian President Volodymyr Zelenskiy on “concerns about the pressures being put on the National Bank of Ukraine (NBU).”

Georgieva said she told Zelenskiy that Ukraine was required to preserve the central bank’s independence under the terms of a $5 billion IMF program finalized weeks ago to help fight an economic slump caused by the coronavirus pandemic.

Zelenskiy, who had called for the central bank to cut interest rates, on Tuesday said he assured Georgieva that he would nominate a new central bank chief by the end of this week and said that person would be an independent technocrat.

National Bank of Ukraine Governor Yakiv Smoliy quit on July 1 shortly after Ukraine signed the IMF program, complaining that the president’s office had tried to push him into cutting interest rates too quickly and letting the hryvnia devalue.

His exit rattled financial markets, forcing the government to abort a 12-year Eurobond placement worth $1.75 billion and raising concerns that the IMF and other lenders would freeze loans.

Georgieva’s telephone call with Zelenskiy followed stern comments by the IMF’s country representative last week.

“It is in the interest of Ukraine to preserve the independence of NBU and it is also a requirement under the current IMF-supported program,” Georgieva said. “I urged President Zelenskiy to stay the course of sound monetary and financial policies – those are key to stronger investment and inclusive growth.”

Georgieva said the central bank had been instrumental in stabilizing the Ukrainian economy and shoring up economic stability and investor confidence, and cleaning up a fraud-ravaged financial sector.

The central bank last month cut interest rates to 6%, the lowest rate since independence in 1991. Critics say it has brought rates down too slowly. (Reporting by Andrea Shalal; editing by Jonathan Oatis and Leslie Adler)

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