Ukraine central banker named first deputy PM

KIEV Mon Dec 24, 2012 10:46am GMT

Serhiy Arbuzov attends a session of the Ukrainian parliament in Kiev December 23, 2010. REUTERS/Gleb Garanich

Serhiy Arbuzov attends a session of the Ukrainian parliament in Kiev December 23, 2010.

Credit: Reuters/Gleb Garanich

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KIEV (Reuters) - Ukrainian President Viktor Yanukovich on Monday named Serhiy Arbuzov - who has until now run the central bank - first deputy prime minister in the new government, making him an important player in upcoming talks with the IMF.

The appointment to the No.2 government position also makes Arbuzov, who is a member of Yanukovich's inner circle, a likely successor to Prime Minister Mykola Azarov.

Ukraine's government resigned on December 3 after October's parliamentary election and its members have since served in an interim capacity, apart from Azarov who was reappointed on December 13.

The first major task of the new cabinet will be to secure a new bailout programme from the International Monetary Fund.

An IMF mission is due to visit Ukraine late in January for what are expected to be tough talks on nailing down a new stand-by arrangement to help Ukraine repay, or refinance, more than $9 billion debt falling due to foreign creditors in 2013.

This includes $6.4 billion already owed to the IMF which Ukraine says it hopes to refinance.

The IMF has urged Kiev to cut subsidies on household gas and heating prices but Azarov has so far refused to take the unpopular step. However, Kiev may have to become more flexible.

Arbuzov, 36, will take over as first deputy prime minister from Valery Khoroshkovsky who quit the cabinet this month in protest at Azarov's re-appointment.

According to a separate decree issued by Yanukovich on Monday, Arbuzov will be in charge of economy, trade, state finances, agriculture and social policy.

Yanukovich's office also announced that Yuri Kolobov, Arbuzov's former deputy at the central bank, would keep his job as finance minister.

The president named former Energy Minister Yuri Boiko and former regional governor Olexander Vilkul as deputy prime ministers.

It was not clear who would succeed Arbuzov at the central bank but last week Boris Pryhodko, head of treasury at state-run Oshchadny Bank, was named its new first deputy chairman.

FAMILY TIES

Arbuzov emerged from relative obscurity to become a major figure in Kiev in September 2010 when he was named first deputy chairman of the central bank in a surprise reshuffle.

Less than four months later, Yanukovich named him central bank head, a position he has held since.

Before joining the central bank, Arbuzov, who was born and educated in Donetsk - Yanukovich's home region and power base - spent four months working at the state-owned Ukreximbank and his earlier career as a financier was in the private sector.

In particular, Arbuzov had worked at the Ukrainian Business Bank, a Donetsk-based lender which according to Ukrainian media is linked to Yanukovich's elder son Oleksandr.

Arbuzov's mother Valentina Arbuzova is the chief executive of the All-Ukrainian Development Bank, another private bank owned by Oleksandr Yanukovich.

Upon taking over the central bank, Arbuzov reshuffled its senior management but largely continued the policies of the previous administration such as maintaining the hryvnia's peg to the dollar.

Although Arbuzov comes across as media-shy and avoided open arguments with the government, official statements and leaked documents from the central bank indicated his opinions on economic matters sometimes differed from those of Azarov.

In June 2011, for example, UNIAN news agency published a leaked letter in which Arbuzov told Azarov his government was losing credibility after refusing to carry out reforms advised by the IMF.

More often than not, though, the government and the central bank worked together smoothly and Azarov has avoided public criticism of Arbuzov's policies.

The two will need to work hard to revive Ukraine's economy which shrank by 1.3 percent year-on-year in the third quarter as global demand for steel, the main Ukrainian export, fell.

(Reporting by Olzhas Auyezov; Editing by Pravin Char)

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