September 20, 2019 / 6:30 PM / 5 months ago

In IMF talks, Ukraine leader promises probe into banking abuses

KIEV (Reuters) - Ukraine’s President Volodymyr Zelenskiy on Friday at a meeting with the International Monetary Fund promised to safeguard the central bank’s independence and supported a comprehensive investigation of abuses in the banking sector.

FILE PHOTO: Ukrainian President Volodymyr Zelenskiy delivers a speech during the Yalta European Strategy (YES) annual meeting in Kiev, Ukraine September 13, 2019. Ukrainian Presidential Press Service/Handout via REUTERS

Zelenskiy’s reassurances come after a turbulent few days in Ukraine where the central bank said reformers in the country were being subjected to “terror” after a property belonging to a former central bank governor was set ablaze.

IMF officials are visiting Ukraine for talks on a new loans-for-reforms program to replace a $3.9 billion stand-by deal that expires next year.

The exact terms and size of the new program have not been publicly disclosed yet, but a senior central bank official previously said the size could be $6 billion.

IMF loans have helped stabilize Ukraine after Russia’s annexation of Crimea in 2014 and the outbreak of fighting in the eastern Donbass region that has killed more than 13,000 people.

A statement published on the presidential website also said Zelenskiy and senior IMF officials discussed PrivatBank, Ukraine’s largest lender, and energy sector reforms.

“I assure my full support for structural reforms in the economy, independence of the National Bank and the comprehensive investigation of abuses in the banking sector,” Zelenskiy said according to the statement.

He did not specify which abuses he was referring to.

The IMF has not commented on its talks with the government so far.

PrivatBank was taken into state hands against the wishes of its ex-owner, Ihor Kolomoisky, in 2016 and its fortunes are closely watched by investors because the IMF could freeze aid if the nationalization is reversed.

Zelenskiy, who has longstanding business ties with Kolomoisky, has demanded an investigation after the home of former Central Bank Governor Valeria Gontareva, responsible for nationalizing the bank, was torched in a night-time attack.

As part of an IMF-supported clean-up of Ukraine’s financial system, the authorities nationalized PrivatBank saying the lender had a $5.6 billion hole in its balance sheet due to shady lending practices. Kolomoisky disputed this assessment.

Zelenskiy has denied suggestions that he would help Kolomoisky regain control of PrivatBank or win compensation.

His new Prime Minister Oleksiy Honcharuk on Tuesday in a text message to Reuters denied an earlier newspaper report about a potential settlement, saying he was not holding talks with Kolomoisky. But Kolomoisky told Reuters by phone he believed the government was looking for a compromise.

Editing by Toby Chopra

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