By Daryna Krasnolutska and Kateryna Choursina

(Bloomberg) -- Ukrainian President Petro Poroshenko is set
to propose a new central bank governor this week, filling a
position that’s been vacant since May as the government
struggles to get its $17.5 billion bailout back on track with
the International Monetary Fund.

Poroshenko will reveal his nomination in the next two days,
with parliament to vote on his proposal on Dec, 21 after
listening to a report from the previous governor, Valeriya
Gontareva, according to a member of the president’s party. Names
to have already been mentioned include Acting Governor Yakiv
Smoliy and Volodymyr Lavrenchuk, chief executive officer of
Raiffeisen Bank International AG’s local unit.

Yakiv Smoliy, now Acting Governor of the central bank, attends a farewell press conference last April by Valeriya Gontareva, then Governor of the bank (UNIAN/Inna Sokolovska)

The central bank has warned that stalled cooperation with

the IMF is a threat to Ukraine’s financial stability,
particularly with the nation’s recovery from a deep recession
losing steam and resurgent inflation prompting a second
interest-rate increase in less than two months last week.
Gontareva, one of Ukraine’s most respected reformers, helped
transform the former Soviet economy after a second pro-European
revolution in 10 years.

“The fact that the situation with the central bank governor
can be finally resolved is positive,” said Sergey Fursa, a bond
trader at investment bank Dragon Capital in Kiev. “Both
candidates who’ve been named as potential new governors are
respected and will be positively welcomed by the banking
community. But the key issue is preserving the independence of
the regulator and thus political bargaining over the post isn’t
acceptable.”

Having initially strengthened, the hryvnia has lost ground
since Gontareva’s departure as IMF transfers were halted. The
currency is eastern Europe’s worst performer against the dollar
this year with a 2 percent loss. It’s unclear when the next
slice of IMF aid will arrive, with issues still to be resolved
including household natural gas prices and pension reform.
The central bank’s press office declined to comment on the
governor’s nomination.

Lavrenchuk didn’t respond to a text
message seeking comment on his possible candidacy.
Gontareva tendered her resignation in April, complaining
that the owners of shuttered lenders and people she’s accused of
money laundering escaped punishment. Her achievements in her
post include negotiating a sovereign-debt restructuring,
maintaining bailout disbursements and cleaning up the banking
industry.

To contact the reporters on this story:
Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net;

Kateryna Choursina in Kiev at kchoursina@bloomberg.net

Timothy Ash writes: No chance of it being Lavrenchuk. Poroshenko’s actions over the past eight months suggest he was never serious about his nomination. It’s either Smoliy - or someone closer to Poroshenko, such as Ukreximbank CEO, Alex Hrytsenko.

Slider Photo: Yakiv Smoliy holds up a new 20 hryvnia note at a National Bank of Ukraine press conference last year. (UNIAN/Vyacheslav Ratynskiy)

Posted Dec. 19, 2107