Ukraine’s central bank chief resigns leaving Zelenskyy’s reform credentials in tatters

UkraineAlert by Anders Åslund

Ukraine’s reform agenda suffered a serious blow on July 1 when Yakiv Smolii, the highly respected governor of the National Bank of Ukraine (NBU), resigned due to what he called “systematic political pressure.” At a time when a wide range of Ukrainian reforms are facing rollbacks and reversals, Smolii and his reformist colleagues at the NBU were among the last reformers still standing. Smolii’s departure now places significant question marks over the country’s future direction.

News of the resignation sent shock waves through Ukraine’s business and political communities. Tomas Fiala, who heads Ukrainian investment management company Dragon Capital, spoke for many when he called Smolii’s exit from the central bank a red line. “We will now postpone all new investments,” commented Fiala. “For the past five months the authorities have been doing the exact opposite of what investors, both domestic and international, expect from them and advise them. This is the last straw. One can only guess what the motives are. It is either complete incompetence or sabotage motivated by Russia.”

Smolii first entered the NBU as deputy governor in 2014 as part of governor Valeria Hontareva’s team. In May 2017, Hontareva was forced out, allegedly due to pressure from Ukrainian oligarchs Ihor Kolomoiskiy and Hennady Boholiubov, whose bank Privatbank she had nationalized in December 2016. Hontareva was later targeted in a series of alarming incidents. She was hit by a car in London, her house outside Kyiv was burnt down, her Kyiv apartment raided, and her daughter-in-law’s car set on fire.

Since taking over at the NBU in 2017, Smolii remained loyal to Hontareva’s reformist mission and her team. As political and oligarchic pressure on the NBU mounted, The most exposed figure was Smolii’s first deputy for banking regulation, Kateryna Rozhkova, who has a reputation as a true iron lady. It was Rozhkova who, together with Hontareva, closed down more than one hundred of Ukraine’s 180 banks from 2014 to 2017 in a major shakeup that won international praise and transformed the fortunes of the Ukrainian banking sector.

Prior to this industry clean-up, it was commonplace for banks in Ukraine to have banking capital equal to about eight percent of banking assets, with owners taking 80-90 percent of assets for themselves as “loans” never to be paid back. Since 2014, the NBU has put a stop to such practices, and the former beneficiaries are not happy about it.

The NBU has also been the driving force behind significant macroeconomic progress in recent years. Ukraine has long suffered from high inflation and an unstable or unsustainable exchange rate. Smolii fixed both problems. Under his leadership, Ukraine’s inflation has fallen to the current level of 1.7 percent a year, the lowest ever recorded in independent Ukraine. With a floating exchange rate, the hryvnia currency has now stabilized at close to 27 hryvnia per US dollar. Moreover, Ukraine’s international currency reserves have surged to USD 28 billion from a low of USD 5 billion in 2015.

For the IMF, the NBU has been the outstanding performer in Ukraine. As the IMF commented in its June 2020 press release announcing a new USD 5 billion standby agreement for Ukraine, “The NBU has skillfully managed monetary policy during a very challenging period. Central Bank independence should be preserved, and monetary and exchange rate policies should continue to provide a stable anchor in the context of the inflation-targeting regime, while allowing orderly exchange rate adjustment and preventing liquidity stress.”

Given this impressive record, why has President Zelenskyy not done more to protect Smolii from undue political interference? First of all, it is important to acknowledge that Smolii is not one of Zelenskyy’s people. There are many in Zelenskyy’s circle who might want such a good job. Secondly, Smolii has adopted uncompromising positions towards Zelenskyy’s alleged oligarch ally Kolomoiskiy. The NBU governor’s resignation now strengthens suspicions that Zelenskyy is unable to say no to Kolomoiskiy.

(c) The Atlantic Council


  1. The mask is now fully off Zelensky. He’s a full on Kremlin agent, and is out to destroy Ukraine. Time for another election.

  2. “It is either complete incompetence or sabotage motivated by Russia.”
    No doubt some of the former. But mainly the latter. Let’s see who replaces him. If it’s putinoid scum, then we will know that the putinazi boll weevils are firmly established; knawing away on Ukraine.

    • I think a mixture of both. Russia want Ukraine destroyed, that’s without a doubt. Kolomoisky is a spiteful, evil bastard and his only interest is money. He is behind all these absurd court cases regarding Poroshenko, because Poroshenko destroyed his mafia banking business. No doubt he was responsible for the attacks on the last leader of the NBU.

    • Yeah! Deliberate destruction of all the reforms under Poroshenko. This is treason.

        • The only opposition to Zelensky as I can see is Poroshenko, the rest of them are either bought off by Russia, or have been promised a slice of the pie when Ukraine is under Russian control.

          • You forgot Yulia. Anyway, i think it’s time to stop all financial support for Ukraine until Zelensky’s regime is down. On the other hand that might be his plan, to ask RuSSia for money instead. Then Putin’s victory is complete.

  3. Yes. I got three, and they are working fine. Although they seem a bit slow. Any idea how to check/increase speed?

    • In your bios will be an option for fan speed control. This depends how old your motherboard is, newer motherboards all have this option.

        • When a laptop is constantly overheating, it can be a sign of a virus attack. Always worth a regular scan for malware. Also it can be clogged up with cookies; worthwhile clearing them out every few weeks.

          • I use CCleaner to clear cookies and other trash on a daily basis, and also have Firefox delete all history when I close it down.

            • CCleaner is an excellent product.
              I am having to use a tablet only now, as Microsoft has stopped supporting Windows 7. Arseholes.

              • Yeah I still have a laptop with Windows 7 on it. It’s just a paperweight now. Have tried Linux in the past, but it doesn’t have the range of software I need on my PC.

  4. And the Hybrid Anti Maidan continues.
    Yet where is the outrage? No people in the streets. No Civil Society objections. No Western disapproval.
    Time for the EU to end Visa free travel. Maybe that will be something that will get everybody’s attention.

What is your opinion?