December 19, 2017 / 3:05 PM / 6 months ago

UPDATE 2-Ukraine parliament may vote Thursday to make Smoliy central bank chief

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By Alessandra Prentice and Pavel Polityuk

KIEV, Dec 19 (Reuters) - Ukraine’s parliament is likely to vote on Thursday on whether to back acting central bank chief, Yakiv Smoliy, as governor on a permanent basis, a government official said, and end months of uncertainty over the highly-politicised nomination.

It is President Petro Poroshenko’s duty to choose a central bank chief, but his delay putting forward a candidate since the resignation of the former governor in May has concerned Ukraine’s backers including the International Monetary Fund.

The president’s choice needs to be approved by parliament and lawmakers are likely to debate the issue on Thursday, said Vadym Denysenko, who is the government’s representative to parliament and also an MP in Poroshenko’s faction.

“There is a high probability that there will be a vote for the new head of the central bank on Thursday,” he said on television channel 112.

“Now one candidate is being considered and it’s acting (governor) Smoliy,” he said. He was certain enough members of parliament would back the nomination which required at least 226 votes in the 450-seat parliament.

Smoliy is widely seen as a safe pair of hands due to his 26 years of experience in the banking sector and work as deputy governor during the bank’s drive to modernise the banking system after a pro-European uprising in 2013-14.

Nevertheless Smoliy’s lack of political experience could mean he lacks the background and skills to juggle commitments to Ukraine’s external creditors with pushback from populist factions in parliament.

Working under Valeriia Gontareva, Smoliy has seen the kind of opposition the central bank chief faced from lawmakers who disagreed with Western-backed austerity measures to shore up the graft-ridden economy.

When she resigned, Gontareva called for the central bank to stay independent, saying she believed resistance to change and reforms would increase.

Under Smoliy’s interim stewardship, the central bank has continued to highlight the importance of Ukraine sticking with its $17.5 billion IMF programme.

Ukraine has received $8.4 billion under the programme, but further disbursements have been delayed by slow implementation of pension changes and gas price adjustments, among other issues.

Senior Ukrainian bankers polled by online newspaper Ukrainska Pravda in May said Smoliy was a suitable candidate to govern the central bank.

“As we have seen, he’s able to take difficult decisions in difficult circumstances, which shows his competence and top managerial skills,” the head of Ukraine’s independent banking association, Roman Shpek, was quoted as saying.

One of the bank’s main achievements has been a clean-up of the banking sector, which led to the closure of half of Ukraine’s lenders. Many had become dangerously under-funded due to shady lending practices and a protracted recession.

A key task for Smoliy as governor will be working with the finance ministry and international financial institutions to help formulate a strategy on state-owned bank reform.

The government currently owns over 50 percent of the banking sector due to the IMF-backed nationalisation in December of PrivatBank, Ukraine’s largest lender. (Editing by Matthias Williams and Richard Balmforth)

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