Ukraine’s Parliament Confirms New Central Bank Head

The Rada ,Ukraine’s parliament, has approved President Zelenskiy’s nomination of Kyrylo Shevchenko, CEO of state-owned Ukrgasbank, as the new Governor of the National Bank of Ukraine (NBU),mid July. Shevchenko replaces Yakiv Smoliy who resigned abruptly on July 3,2020, citing political pressure.
“ Given the very sensitive nature of Smoliy’s departure and accusations, in terms of Ukraine’s cooperation with the IMF, the key issue from a market perspective was the perceived acceptability to the Fund of Zelenskiy’s pick for the new Central Bank Head. In our view, Shevchenko’s appointment does not raise any immediate “red flags” for the IMF and as such, is positive from a near-term credit perspective because it removes the uncertainty around who would fill the vacancy at NBU’s helm (for context, NBU was without a permanent governor for almost a year after the previous governor’s resignation),” Gramercy said.
Going forward, the IMF will focus on evaluating NBU’s policies under the new governor as well as on any threats to central bank independence, but this process will play out over a period of time during which we believe, Shevchenko will receive the benefit of the doubt from investors. In an unequivocal signal on its stance vis-à-vis NBU, after a phone call between IMF Managing Director, Kristalina Georgieva, and President Zelenskiy preceding Shevchenko’s nomination, the Fund issued a statement that “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”.
As such, in our view, as long as there are no material changes to the policy framework and/or independence of NBU, the IMF will maintain its strong support for Ukraine. From our local interlocutors we understand that Shevchenko has a reputation of being a strong manager and a history of working with external donors such as the International Finance Corporation (IFC), part of the World Bank. With a new NBU Governor in place, investors will be awaiting the potential re-launch of the Ukraine 2033s Eurobond deal that the Ministry of Finance pulled back from the market after Smoliy’s resignation became public on the same day as the bond sale. Refinancing near-term external obligations with longer dated debt amid current benign global financial conditions would be a credit positive development for the sovereign, especially in the context of unprecedented medium-term global economic and market uncertainty due to the pandemic.