Ukraine's Tymoshenko attacks central bank governor candidate Smolii

Ukraine's Tymoshenko attacks central bank governor candidate Smolii
Ukraine's Tymoshenko attacks central bank governor candidate Smolii as her ratings improve
By Sergey Kuznetsov in Kyiv February 26, 2018

Former Ukrainian prime minister and Batkivshchyna (Fatherland) faction leader Yulia Tymoshenko believes that parliament’s vote to approve the appointment of a new governor of the National Bank of Ukraine (NBU) Yakiv Smolii, who is supposed to replace outgoing governor Valeria Gontareva, is "unacceptable", the politician told leaders of other factions on February 26.

"Our faction warns against voting for Gontareva's heirs and pocket bankers of [Ukrainian President Petro] Poroshenko as NBU governor. I mean Smolii, who was, in essence, an accomplice in conducting this shameful monetary and credit policy, and it should not be allowed to continue this," Interfax news agency quoted Tymoshenko, a popularist firebrand, as saying.

The politician added that Ukraine faces the start of hyperinflation, which is "a consequence of the absolutely criminal work" of the NBU. Inflation has been rising in recent months and touched 16% last month that has forced the NBU to make a surprise 150bp rate hike in January that will hurt growth prospects. However, the increase in inflation has more to do with the government’s decision to double the minimum wage last year than the NBU’s mismanagement of monetary policy.

"Now they are dismissing the head of the NBU, but this is not enough. Let her [Gontareva's] report in parliament and answer the questions," Tymoshenko said, underlining that it is necessary to create a temporary investigative commission that "will deal with how the country could be brought to such an extent of inflation and reduction of social standards."

The statement followed recent announcement made by the Verkhovna Rada's speaker Andriy Parubiy that the parliament may vote to approve the appointment of a new governor of the regulator on March 1.

The statement followed January's failure to consider Gontareva's resignation and the appointment of Smolii, the acting head of NBU, as a candidate for the post. Ukrainian President Petro Poroshenko nominated Smolii as a candidate for the post of the governor on January 18, who previously served as Gontareva's deputy and is well-liked by international investors as he is seen as a competent pair of hands.

On January 19, the NBU's media office published Gontarev's photo with the central bank's headquarters in downtown Kyiv in the background. "This is the photo response to the reproaches of some politicians that Gontareva is outside Ukraine," the media office wrote in a statement. "Today she expected an opportunity to make a report in the Verkhovna Rada and visited the NBU."

Gontareva, who is a close business associate of President Petro Poroshenko, has led the central bank since June 2014. She stepped down from the post on May 10, although some analysts have speculated that she was pushed out of the job following her attack on oligarch-controlled banks. In December, the NBU nationalised the country’s largest commercial lender Privatbank, which belongs to oligarchs Ihor Kolomoisky and Hennadiy Bogolyubov.

Meanwhile, the latest polls demonstrate that Tymoshenko continues to lead them. According to the survey that was conducted by the Rating Sociological Group between December 12 and 28, Tymoshenko enjoys 18.7% support during expected 2019 presidential elections. A the same time, only 15.6% of respondents are ready to support Poroshenko.

In a second-round runoff, 30% of respondents said they would vote for Tymoshenko, compared to 23% for Poroshenko. What is surprising is that despite Poroshenko’s palpable unpopularity, this has not translated into a bigger gain for Tymoshenko; the poll results show that the population are unhappy with all their leaders and not just the president, although that has changed somewhat recently.

"Tymoshenko’s poll numbers are surprisingly improving, despite her lack of accomplishments recently and limited media appearances," Zenon Zawada at Kyiv-based brokerage Concorde Capital wrote in a research note on February 26. "We can only interpret this as voters supporting Tymoshenko mainly to express their dissatisfaction with Poroshenko and to prevent his re-election."

Concorde believes Poroshenko has time to shore up his popular support, but the current flowing against him has strengthened.

Meanwhile, some experts believe that Poroshenko has significant chances to beat Tymoshenko in a possible second-round runoff due to the fact that Tymoshenko has one of the highest negative ratings amongst Ukrainian politicians (amount of voters who will not vote for the former PM in any case). Ukraine's western backers and donors will also likely support Poroshenko against Tymoshenko during the second-round runoff, as the later is strongly associated with populism and anti-market solutions.