'No private interests ever meddled with the National Bank'
ine, considering the high expectations of your government?
A: I can't say there's something a priori, that something stands in the way of reform. As to our macro-economic approach, we started with the idea that we have to make everyone follow a number of basic principles in the financial secto and other major markets.
What principles would we like to establish? First of all, the country has to create a modern market economy. We have to peel off most of the pretense that was created around reform, when reform was announced but not carried out. How do you restore trust in reform if people are allergic to the word 'reform'? There are several pan-national things that we have to do to return to the values on which our reform is based. A European program has to be tabled in parliament, and it has to receive political approval. Second comes formation of a political majority in support of this program. Thirdly, it's a healthy budget, I mean a deficit-free budget that would financially support healthy tendencies.
Q: At the moment, Ukraine has macroeconomic stability and microeconomic stagnation because of the strong resistance to reform locally. Are you strong enough to overcome it?
A: For reform to take place, you have to have macroeconomic stability: In the last two years we have achieved monetary stability. But macroeconomic stability without structural reform doesn't give any dynamics. What have we done? First of all, we are working with a deficit-free budget. It means that all the resources that were consumed by the government last year now go to the economy. In the first quarter of last year, the National Bank gave Hr 1.7 billion to the government for financing the budget deficit. This year, we banned any growth of internal and external debts, and make a deficit-free budget. The money, including that of the National Bank, goes to the economy and starts financing various economic programs.
Look what happened this year: The economy received Hr 1.3 billion in credits that weren't consumed by the government. What has the economy done: Industrial output grew by 10.2 percent, the GDP for the first time in 10 years grew by 6.1 percent. Since the economy is growing, the budget revenues from taxes also must be growing. The consolidated budget received 36 percent more than last year [in the first quarter].
Q: The scandal around the National Bank: It's been promised that the audit of its operations would be released soon. What is soon, is it days, weeks, or months?
A: All the operations we're talking about are public, they were known two years ago. These operations are not secret, they all underwent an audit. As soon as this problem occurred, we offered to conduct a special auditing investigation on each particular period we were interested in, and broke it into three periods. The audit of the first period finished [in February], and the National Bank released a statement. The second audit finished in the [end of March], and the next audit is planned. I understand that it will be over in the second half of May.
If you look at the root of this problem, I can say clearly that the National Bank of Ukraine has never financed or credited any political programs or any private programs. No private interests ever meddled with the National Bank's activities.
Q: But if you're depositing money at the rate of 6 percent and then lending at the rate of 60 percent, there is potential that somebody is making a substantial profit.
A: You have a very simplified view. We're talking about different interest rates. You take every day of the operations, and see what the price was on that day and then analyze at what price the National Bank was depositing money. Two years ago, when we were reporting to parliament, I remember that there wasn't a single day [discovered] when the deposit hadn't been placed not at the highest rate of the day. Here, we mean hard currency deposits. But when you're talking about 60 percent, you're talking about the hryvna. Hard currency deposits and Finance Ministry borrowing are two different markets. What the Finance Ministry did at 60 percent was the cheapest borrowing possible. This is an improper question, but I understand that from the point of view of a newspaper publication, it does stand out.
Q: If you could live again the last three years, what would you do differently?
A: I wouldn't have conducted these operations, and I'll explain why. When I looked at the technology of how they were conducted, the motives behind them – state and national interests – I could understand. But from the point of view of ethics, I wouldn't have conducted these operations. That's why after the parliamentary hearing had finished in Ukraine, my first proposal was that the member of the board who supervised this sector resign. Not because we don't trust him, he's an honest and professional banker.
But from the point of view of ethics, the deposit placed specially for buying the state securities is controversial.
Q: The First Ukrainian Investment Bank that was involved in the operations, is it true that it's owned by your brother?
A: None of the operations was conducted through this bank. In connection with this, I wrote an open letter to everyone: If somebody knows about some private interests in these operations, please inform the international [auditors] and the International Monetary Fund. It's lies, it's the thing that I'm pained to hear as a person.
Q: You have an American wife, it's very unusual for Ukraine. How does your family life influence your vision of Ukraine's future?
A: My wife is Ukrainian. You know, this person devoted herself to Ukraine so much that I would wish every Ukrainian did the same for Ukraine. Her family comes from Ukraine, all of her relatives live near Kyiv, her cousins live in Ukraine, and she's been living in Ukraine for nine years. I would like to say the following: We live in the beginning of the third millennium. Who has what wife? Where she was born? I think today it's not a defining thing. What criteria the person lives by, and what interests he serves [is important].
