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KIEV, March 2 (Reuters) - Before she was appointed to head Ukraine’s central bank last June, Valeriia Gontareva was praised as one of the most successful investment bankers in the country. Since then, she has heard little but demands for her downfall.
Every day dozens of people chant “Gontareva! Resignation! Prison!” outside her office in Kiev. Prosecutors have launched a criminal investigation into the fall of the hryvnia currency. Tabloids published photos of her son relaxing in expensive hotels while Ukraine teeters on the brink of bankruptcy.
On Monday one political party in the governing coalition unfurled a banner behind the speaker’s chair in parliament.
“Sack Gontareva, the looter!” it read.
Certainly, no central banker would envy her record on paper: in less than nine months since she took office, the hryvnia has fallen to around 30 to the dollar from 12. Inflation has jumped to 25 percent from 12 percent, bank deposits have fallen by a third, a quarter of banks have gone bankrupt and the central bank’s foreign exchange reserves have shrunk to $6.42 billion from $17.08 billion.
Thanks to the falling currency, the average monthly wage is now worth only around $150. The country is nearly broke, haemorrhaging cash in a war in the east and suffering from decades of mismanagement and corruption.
Last Wednesday, it looked like the 50-year-old might finally be finished. With the hryvnia plunging yet again and no floor in sight, Gontareva suddenly announced a ban on nearly all commercial currency trading for the rest of the week.
A furious Prime Minister Arseny Yatseniuk told a televised cabinet meeting that the ban was a threat to the economy. Gontareva had taken the decision without consultation, he said. He himself had found out about it that morning from the Internet. He would demand an explanation.
Gontareva was summoned for a three-hour emergency meeting with Yatseniuk, President Petro Poroshenko and Finance Minister Natalia Yaresko.
After, at a hastily-organised news conference, journalists asked Gontareva whether her resignation was coming. She said it had not been discussed. Finance Minister Yaresko backed her up: “We have more important points to discuss: how to stabilise the financial system.”
That night, the currency trading ban was lifted as suddenly as it had been imposed. If the rapid reversal looked like erratic policymaking, it also proved effective: while the market had thought the ban would last the full week, the central bank had swooped in and bought dollars at a discount. The next day, it sold them at the same reduced price, putting a floor under the value of the hryvnia.
By Monday, the hryvnia was trading at a rate nearly 20 percent stronger than its low six days earlier, before the ban.
Still, few came to Gontareva’s defence.
“I have no doubt that Gontareva is smart and she has her strong points which helped her become a successful investment banker,” said Gleb Vyshlinsky, analyst of GfK Ukraine. “But it seems that she overestimated her competence. She agreed to become the central banker and now her reputation is ruined.”
Currency traders say the hryvnia’s slide was halted mainly by administrative measures that hurt importers, and which won’t work in the long term.
“The bank is doing everything it can to squeeze the market and prevent importers buying currency,” said one bank trader on condition of anonymity required by the employer. “Now, all (import) contracts need to be confirmed, and the bank is confirming them in a lackadaisical way. To call this skilful central bank policy is out of the question.”
Gontareva’s job is safe unless she quits or Poroshenko asks parliament to sack her. So far he has shown no public sign of withdrawing support. Over the weekend he backed efforts to push the hryvnia back up to 20-22 to the dollar.
Poroshenko’s aides say it was precisely Gontareva’s willingness to press ahead with hard decisions under fire that led the president to pick her in the first place.
“He knew that she could go ‘kamikaze’, that she had to take unpopular painful measures,” said an official close to the president.
But Poroshenko’s own popularity has fallen with the currency, and he may yet decide Gontareva needs to be sacrificed. Some analysts believe she may go once the IMF gives the final blessing to the $17.5 billion four-year bailout deal.
From the outset, she took on the central bank’s bureaucracy, often angering staff.
“If your manager says that at your organisation there are 50 percent superfluous people and they have to go, I do not think that you would like it,” said one employee at the bank.
Another predicted mass resignations if she stays.
“It is like she came from another planet.... She is a vivid example of the fact that not all private businessmen or people from the private sector can manage the public sector.”
Her boldest move yet was to cancel a fixed exchange rate, which prompted a dramatic sell-off in the hryvnia. The currency has already lost half its value since the start of 2015 after halving over the whole of 2014.
She told furious lawmakers that unmooring the rate was necessary due to a lack of economic reforms over the past 20 years, a weak economy and the separatist war in the east.
“My main message is: we will never ever have a fixed rate. Crisis is a time of action for the National Bank,” she told parliamentary hearings. Angry lawmakers pelted her with fake dollars.
Responding to a lawmaker who asked where people could buy foreign currency as it was disappearing from exchange offices, she said sharply: “Do not buy currency. Everyone who buys currency creates panic.”
Gontareva studied economics before embarking on a 20-year career in finance, working at Ukrainian subsidiaries of Societe Generale and ING before becoming chairman of Investment Capital Ukraine (ICU), an investment company founded by her husband.
She told the newspaper Kommersant in late 2007 that she saw no reason why ICU couldn’t become Ukraine’s third-biggest investment firm. It did better, reaching second place last year with 18 percent of the local bond market.
An employee from those days says Gontareva “is very persistent and usually succeeds. She was an extremely democratic and liberal but very demanding leader.”
Defiant as ever, Gontareva told online newspaper Ukrainska Pravda on Monday that she had received words of support from abroad, including from IMF chief Christine Lagarde.
“They said I’m really great, that I took on an incredible challenge.” (Editing by Peter Graff)
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