We are hardly the financial experts who can untangle the allegations of corruption leveled against the National Bank of Ukraine. But we hope someone, perhaps one of Ukraine’s benevolent Western creditors, will. The charges of insider trading and profiting sound plausible to us.
The 13-year-old hryvnia is a weak and wobbly currency. It is useless outside of Ukraine and distrusted even within the only nation where it is in use as legal tender. Frequent interventions – using dollars to buy and sell hryvnia on the interbank money market – are needed to prop up and stabilize the value of this money. Those are performed by a central bank notorious for its lack of transparency.
In this context, recent accusations of official misuse of international financial aid should surprise no one. Who governs this bank, making financially important decisions with the power of valuable insider information?
Many of them are close to the nation’s leading politicians and richest businessmen. For example, Party of Regions member Rinat Akhmetov, Ukraine’s richest billionaire, has at least three allies on the 15-member supervisory council. The four-member executive board of the central bank, which makes day-to-day decisions, is appointed by President Victor Yushchenko. Prime Minister Yulia Tymoshenko who has recently been attacking the NBU ruthlessly, also has representation on the supervisory council. Another presidential front-runner, Arseniy Yatseniuk, quick to criticize the central bank, personally sits on the supervisory council and has not gone public with concrete details of alleged wrongdoing.
Until vague allegations of currency speculation and corruption are backed up with proof, we assume the allegations are politically motivated – or else, the well-connected insiders are in on it. Perhaps going public with evidence would violate the informal rules of this privileged clique, with violators running the risk of getting ejected from the exclusive club where the pot of Ukraine’s riches is divvied up.
Meanwhile, the rest of Ukraine is left wondering what the hryvnia will be worth tomorrow. Also on the outside are European banks that don’t enjoy the privilege of billions of dollars in central bank aid, including some of the $16.4 billion International Monetary Fund loan.
Western banks and the IMF have repeatedly for increased independence and transparency at the NBU. The IMF, however, has refrained from commenting on recent NBU accusations of corruption. It appears Western lenders such as the IMF are determined to help Ukraine at all costs, even if its leaders do nothing to promote transparency, fiscal probity and above-board business dealings by government. That’s a shame. It makes the IMF complicit in possibly huge financial crimes against the nation.
To end this frenzy of alleged fraud, the IMF should hold up further aid until legislation is adopted to make the central bank more independent and transparent. The strong grasp over it by Ukraine’s richest should be curtailed. Impartial banking experts and representatives of foreign-owned banks should be brought in. NBU leadership should also be required to issue clear and regular public announcements of its plans for the currency, interest rates and bailout-aid conditions.
