Ukraine's PM threatens to resign if anti-corruption court is not established

Ukraine's PM threatens to resign if anti-corruption court is not established
By bne IntelliNews June 4, 2018

Ukrainian Prime Minister Volodymyr Groysman threatened to resign his post if an independent anti-corruption court (ACC) is not established in the country, the politician told journalists on June 4.

"I have made a decision for myself: if this court, fair, independent, is not created, I will forfeit the authority of the prime minister and resign," Interfax news agency quoted Groysman as saying. "It is important for [legislation on] the anti-corruption court to be passed; otherwise, if this important decision is not made, it will both undermine confidence within society of government and government institutions and significantly damage our international credibility."

Establishing an independent anti-corruption court is a crucial condition for a new tranche from a $17.5bn support package agreed by Kyiv with the International Monetary Fund (IMF) in 2015. Ukraine has received $8.4bn from the IMF so far under the lender's programme. However, the allocation of more tranches stalled in 2017 due to lack of progress in Ukrainian reforms, specifically, over establishing of an independent anti-corruption court.

Experts took a cautious approach towards Groysman's statement. "He is making a habit of this [threatening to resign]," Timothy Ash, a senior sovereign strategist at BlueBay Asset Management, wrote in a short note the same day.

To some commentators Groysman’s threat to resign looks like more political grandstanding to curry favour with the international donors and distance himself from any disaster that follows the end of international support. The government has been extremely reluctant to set up the ACC, which they say undermines Ukraine’s sovereignty.

“I wouldn't call it a theatre, I think that's the way to pressure [President Petro Poroshenko] and coalition. And also for Groysman to get some extra points of support from internationals,” political analyst and bne columnist Katya Kruk tweeted.

“As far as I know, he is the one (and almost only) who is opposing gas tariffs hike. So it is a theatre. He is stressing his backing of the one IMF demand. But he is fiercely against another one,” Roman Motychak, the founder of Ukrfinform, tweeted back.

Analysts are becoming increasingly concerned about the fragile state of the Ukrainian economy and warned recently that the possibility of a default on the country’s international debt and a devaluation of its currency are on the cards unless a new deal is thrashed out with the IMF and its peers.

Alexander Paraschiy at Kyiv-based brokerage Concorde Capital believes that Groysman's announcement indicates he's well aware of the risks posed by failing to secure the IMF tranche this month and he wants nothing to do with the potentially dire consequences.

"He knows that no IMF tranche will also mean no loans from the EU and the World Bank in 2019. That also means Ukraine’s international reserves will fall below the level of three months of future imports no later than the first quarter of 2019," Paraschiy wrote in a research note on June 4. "That will also heighten risks for the Ukrainian currency, prompt an unavoidable downgrade of Ukraine’s credit rating and raise the sovereign debt risk. Needless to say, Groysman or any other ambitious politician won’t want to be Ukraine’s prime minister under such conditions."

The expert added that Groysman has shown himself to be no technocrat, but a populist politician eager to remain active in Ukrainian politics for years to come. "Yet any resignation that he might take (he is also reported to have considered resigning to avoid natural gas price hikes) won't help his lack of popularity. Lacking charisma or any signature policy, Groysman's two years as prime minister have failed to propel him to political stardom."

In late May, the National Bank of Ukraine (NBU)'s governor Yakiv Smolii said that the regulator is going to tighten its monetary policy and introduce some currency restrictions if the inflationary pressure worsens and if Ukraine fails to receive the new tranche from the IMF.

"If the inflation pressure grows, of course, the NBU would strengthen monetary tools to curb inflation. We will introduce some restrictions for preventing the possible removal of capital," Smolii underlined. He added that the issue of possible scenarios if no money from the IMF arrives was discussed at a meeting of the NBU monetary policy committee.

Meanwhile, the parliament's speaker Andriy Parubiy said on June 4 that he was sure that the Verkhovna Rada will pass legislation on an anti-corruption court on June 7. "Everything possible needs to be done for decision to get passed on Thursday, taking into consideration the Venice Commission's recommendations," Parubiy added.

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