“It appears that a centralized system of power is being established,” Dmitry Gourov, an emerging markets strategist UniCredit SpA in Vienna, said by phone. “The new governor will have to establish his credentials in the coming weeks and prove that he is able to steer the bank independently and professionally. Markets will be skeptical.”
Yanukovych sent a request to parliament to replace Stelmakh with Serhiy Arbuzov, the second in command at the Natsionalnyi Bank Ukrainy, according to a statement on the president’s website late yesterday. Stelmakh’s term was due to end in December 2011. Changing the governor needs the support of the country’s 450 lawmakers.
Yanukovych won the presidency in February, replacing Viktor Yushchenko, who appointed Stelmakh in 2004. He cemented his grip when the Constitutional Court in October removed limits from the president’s powers, giving him the right to name the prime minister and the Cabinet.
“Yanukovych and his administration are taking all state institutions under their umbrella step by step,” Alexander Valchyshen, the head of research at Investment Capital Ukraine, said by phone. “The risk that the Natsionalnyi Bank Ukrainy’s policies will become more dependent is strengthening.”
Ukraine’s hryvnia declined to 7.99 per dollar as of 10:38 a.m. in Kiev from 7.9750 yesterday, Bloomberg data shows. The hryvnia, which strengthened 1.53 percent versus the U.S currency from January till September, lost 1.08 percent after Arbuzov’s appointment.
‘Aimed at Hryvnia Devaluation’
Arbuzov, 34, was appointed to the central bank by the president in September, replacing Anatoly Shapovalov, a Stelmakh ally. He was the head of PAO Ukrainskyi Biznes Bank before becoming Stelmakh’s first deputy. UBB, the country’s 63rd largest lender according to central bank data, is based in the eastern Ukrainian city of Donetsk, Yanukovych’s home town.
“Yanukovych’s Party of Regions is a party of exporters, so the new central bank governor may defend their interests, which means his policy may be aimed at hryvnia devaluation or not allowing the hryvnia to appreciate.” Valchyshen said.
Arbuzov’s mother, Valentyna Arbuzova, is the chief executive officer at PAO Vseukrainskyi Bank Rozvytku, which is 138th largest bank by assets, according to the central bank data.
Former Prime Minister Yulia Timoshenko also tried to oust Stelmakh, 71, during political gridlock that exacerbated the country’s economic slump and led to an international bailout in 2008. Ukraine was forced to turn to the International Monetary Fund after the global financial crisis cut demand for its exports and the economy shrank 15.1 percent in 2009.
The country this year adopted a law to strengthen the central bank’s independence to meet conditions for the first payment from a $15.2 billion bailout loan. The IMF’s executive board will meet today in Washington to decide on the second installment.
“The presence of the IMF program should limit the erosion of credibility at the central bank,” Gourov said.
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