The International Monetary Fund (IMF) has hinted to the Ukrainian president Volodymyr Zelensky, that any further financial aid depends on his ability to resolve a long-running corruption dispute, CNBC reports.
Ukraine’s largest commercial bank, Privatbank, was nationalized in 2016 following insolvency. The government pursued nationalisation of the bank in order to protect its 20 million customers and to avert yet further financial instability.
Ukraine’s central bank investigated the practices of Privatbank and found that 97% of its corporate loans had gone to “related parties” of the main shareholders — Igor Kolomoisky and Gennadiy Bogolyubov. It described “a large-scale and coordinated fraud over at least a 10-year period ending in December 2016.”
The IMF, which had given Ukraine a $17.5 billion aid package in 2015, backed the nationalization but insisted earlier this year that “it is important that the authorities continue their efforts to recover losses from former owners and related parties of failed banks.” However, the former owners have been lobbying hard to have the bank returned to them.
Zelensky rose to prominence playing a president of Ukraine on a popular TV comedy. He campaigned to reform the country and end the influence of the nation’s oligarchs. Awkwardly however one of his main supporters was Igor Kolomoisky, who also owned the TV station on which he rose to prominence.
A potential three-year $5 billion credit line from the IMF could be shut off if Zelensky is not seen to seriously stamp out corruption and the influence of the country’s oligarchs. An IMF team visiting the country told CNBC it would be discussing “policies that would be needed for the Fund to be able to continue to support Ukraine.”
Kolomoisky met with Zelensky only last week but denied discussing Privatbank. Following the meeting he has stated: “We do not agree with the nationalization, this dispute is easier to resolve today than under the previous president.”
Ukraine’s Prime Minister Oleksiy Honcharuk observed in an email with the Financial Times:
Whether the guy is really a reformer, or just in the pocket of another oligarch, will be determined by how he plays this one out. Lots of warm words on reform hot topics like land reform will count for nothing if Zelensky backs Kolomoisky in reversing the Privatbank nationalization.