July 16, 2020 / 1:21 PM / 23 days ago

Ukraine parliament approves Shevchenko as new central bank chief

KYIV/LONDON (Reuters) - Ukraine’s parliament on Thursday appointed Kyrylo Shevchenko, head of the state-run Ukrgasbank, as the new central bank governor, putting an end to two weeks of turmoil that had threatened Kyiv’s access to critical funding.

Head of state-run Ukrgasbank Kyrylo Shevchenko delivers a speech during a session of parliament in Kyiv, Ukraine July 16, 2020. Ukraine's parliament approved Shevchenko as the new governor of the Central Bank. REUTERS/Tetiana Bondarenko

Shevchenko emphasised continuity in remarks at his confirmation hearing. The news lifted sovereign dollar bonds by as much as 4 cents.

“Of course, I support the policy of the National Bank aimed at ensuring the macroeconomic and macro-financial stability of the banking system,” Shevchenko told parliament.

President Volodymyr Zelenskiy nominated Shevchenko to become the new governor on Wednesday, two weeks after his predecessor Yakiv Smoliy quit over what he called systematic political pressure. His resignation sparked a selloff in the country’s bonds and forced Kyiv to pull a Eurobond sale.

Shevchenko, 47, born in Russia, a career banker who worked briefly in a mine, had been tipped by local media to become the next governor since February.

In the past, Shevchenko has criticised monetary policy under Smoliy for being too hawkish, allowing the currency to appreciate and push up import costs. He has also praised government efforts to make loans cheaper for businesses.

His appointment was supported by 332 lawmakers, easily clearing the 226 votes needed.

“The government is ready to work with the National Bank to restore the economy, macroeconomic stability and the availability of credit,” Prime Minister Denys Shmygal wrote on Twitter.

Danylo Hetmantsev, head of the parliament financial committee, said: “The questions to which Shevchenko gave an unequivocal answer: There will be no inflation, no uncontrolled (money-printing), the independence of the national bank will be preserved.”

Smoliy’s sudden resignation had rattled markets and sparked concern at the International Monetary Fund (IMF), whose $5 billion stand-by assistance programme for Ukraine is contingent on the central bank’s independence. The IMF earlier this week appealed directly to President Zelenskiy over “pressures being put on the National Bank of Ukraine”.

BOND SALE BACK ON?

Foreign investors said the bond rally showed markets were relieved an appointment had been made and comfortable with the choice - though much would depend how independent Shevchenko would turn out to be from political pressure.

“He is a middle-ground candidate,” said Viktor Szabo, investment director at Aberdeen Standard Investments in London.

“He is a technocrat, he has banking experience and he is close to the market. On the independent bit - we don’t know yet.”

Others pointed to his connections with multilateral institutions, working closely with the World Bank as Ukrgazbank head.

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“This is per se a first positive signal for future co-operation with IMF and other multilaterals,” said Sergey Dergachev, a fund manager at Union Investment.

The appointment also meant the aborted bond sale could finally go ahead.

“I’d be very, very surprised if that deal wasn’t kicked off again sometime next week,” said Richard House, CIO emerging market debt at Allianz Global Investors. “It’s obviously damaged (their) reputation a bit, so they will have to pay a little bit more than if this hadn’t happened.”

Reporting by Natalia Zinets, Pavel Polityuk and Sergei Karazy in Kiev and Karin Strohecker and Tom Arnold in London; Editing by Alison Williams, Hugh Lawson and Peter Graff

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