National Bank of Ukraine head Valeriya Gontareva is hoping for at least another $20 billion in loans to help bail out Ukraine’s struggling economy.
At a news conference on Oct. 16, Gontareva said a $17 billion bailout by the International Monetary Fund is not enough, given the expected 8.3 percent contraction in the country’s economy this year. Gontareva attended an IMF meeting from Oct. 10-12 in Washington D.C.
The deal isn’t done yet, but Gontareva is optimistic.
“Paul Thomsen, deputy director of the IMF’s European Department, reassured me that the fund’s help may be bigger,” the central banker said.
Russia’s ongoing war against Ukraine has caused a 6.8 percent drop in exports during the first eight months of this year, putting pressure on the nation’s current account.
The war-hit Donbas, whose share in the overall exports used to reach as much as 30 percent, simply can’t do business as usual. “The IMF for sure will help to deal with the current account deficit,” said Gontareva. “As head the of National Bank I can’t do anything to produce Donbas’s share of exports.”
As journalists criticize the central bank’s restrictive measures on the foreign exchange market, because they believe it stimulates the shadow economy, Gontareva says her measures are more effective than those of Serhiy Arbuzov, her predecessor under ex-President Viktor Yanukovych, “who spent $22 billion of central bank reserves just to keep the hryvnia at a rate of 8 against the U.S. dollar.” Right now, the National Bank doesn’t allow banks to sell more than $200 a day to a person.
However, many disagree with Gontareva’s currency policy and blame her for the hryvnia’s 38 percent devaluation this year. Protests near the National Bank headquarters on Kyiv’s Instytutska Street are typical.
Gontareva says she is hoping for European Bank for Reconstruction and Development assistance in recapitalizing some Ukrainian banks, based on her conversation with EBRD president Suma Chakrabarti. The EBRD holds stakes in some banks – like Ukrsibbank and ProCredit. Moreover, the EBRD is also considering a loan for Naftogaz, Ukraine’s money-hemorrhaging gas monopolist, so it could secure reverse gas flows from countries in the European Union.
Meanwhile, the European Investment Bank may provide a $3 billion loan for energy projects in Ukraine. Plans include financing the modernization of Urengoy – Pomary – Uzhgorod, a major gas pipeline for delivering blue fuel from Russia to the EU.
American billionaire George Soros, whose Open Society Foundation has been active on the Ukrainian civil society scene, is launching a donor conference to gather money for reconstructing the Donbas, according to Gontareva.
Gontareva also met her Russian counterpart, Elvira Nabiullina, who told Gontareva that Ukraine will get Hr 3.9 billion stuck in the National Bank’s branch in Russian-annexed Crimea. Ukrainian banks will also get their Crimean assets. Meanwhile, Russia-owned banks that operate in Ukraine will receive additional support from Kremlin coffers as global sanctions against the Russian financial system affect banks’ liquidity, Nabiullina said.
Central bankers from Canada, France, Georgia, the Netherlands and Poland will be providing technical assistance to Ukraine’s National Bank.
“Unfortunately, current Ukrainian legislation does not allow me to hire foreign citizens and to get the best experts on the NBU staff,” said Gontareva. The situation is different in developed economies. Stanley Fischer, who holds dual American-Israeli citizenship and even led Israel’s central bank, now holds a vice chairman seat at the Federal Reserve. Mark Carney, a Canadian citizen who governed the Bank of Canada, currently heads the Bank of England.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
