Wednesday, February 29, 2012

New man at MinFin closes Yanuk's grip on state finances

The sober-minded 'Kommersant' runs a story today entitled 'Financial assistance', about the new 38-year-old Minister of Finance, Yuriy Kolobov.

Below are some portions of the article:

A powerful ally of the National Bank has appeared in the government. Yesterday, the President appointed first deputy head of the National Bank of Ukraine, Yuriy Kolobov as Minister of Finance.

According to experts, he will be responsible for the refinancing of debt, and preventing social benefits problems springing up on the eve of parliamentary elections. Political analysts believe that his appointment now gives the President full control of the country's monetary and fiscal policy.

The post of the Minister of Economic Development and Trade is still open. The main contender, Petro Poroshenko, met the president last week and has now to submit a plan for the development for the economy.

The head of the parliamentary committee on finance, banking, tax and customs policy, Vitaliy Khomutynnyk (PoR) called financier Mr. Kolobov a professional with extensive experience in banking. "He knows the problems of the financial system from the inside. As the first deputy chairman of the National Bank, Yuriy Kolobov attended our committee meetings and we had a constructive relationship. I think, in his new position he will also be effective," said Khomutynnyk.

Mr. Kolobov has worked in the National Bank about a year before that held senior positions in Ukreximbank, BTA Bank and Oshchadbank. His career before 2008 is almost unknown.

According to economic experts, in his new position Mr. Kolobov's first task is to fulfill obligations and eventually repay debts of up to $100 billion, a portion of which have to be repayed by the summer. [BTW Much more on this here: ]

His predecessor, Valeriy Khoroshkovsky, last week said that Ukraine would be able to fully repay foreign debts, even without assistance from the IMF.

Director of economic programs of the Razumkov Centre, Vasyll Yurchishin doubts whether further IMF lending will take place: "The IMF does not like to give money before elections."
Kolobov has to find sources of funding to improve social welfare standards - increases of which will become an integral part of autumn's parliamentary election campaign. "If he agreed to head the Finance Ministry, it means he knows what he has to do," said one commentator.

Others add that the the new finance minister will "find common ground with the banks and "persuade" them to actively buy government bonds".

"Foreign borrowing is now closed, leaving only internal resources - and these resources are primarily the money of banks. If practices of the mid-'90's are revived when the sale of government bonds was carried out in close relationship between the Treasury and the banks, a substantial increase in the flow of money to buy hryvnia and foreign currency government bonds can be expected. At that time a system of "manual control" was utilised whereby banks were interviewed, after which they could not refuse to buy government bonds. They were given a direct recommendation to buy, so that there would be no problems" according to a '' source.

Political analysts also believe that the appointment of 'their own man' to this key ministry finally firmly closes the president's circle of control over public finance income and expenditure.

National Bank of Ukraine chairman Sergey Arbuzov is the son of Valentina Arbuzova, who heads the VseUkrainskiy development bank, owned by the president's son, Alexander Yanukovych.

34-year-old Arbuzov and Kolobov share spectacular common career trajectories.

Viktor Yanukovych has thus concentrated all the financial, monetary and fiscal policies in the country, according to the director of the Institute of Global Strategies Vadim Karasev.

"The [newly] constructed financial vertikal should now bolster the power vertikal, cutting off any lobbying efforts to control the budget", he said. This is especially true on the eve of parliamentary elections.

The article includes a cartoon captioned "He knows how to find solutions to problems, and senses where the financial streams are" It shows a tiny [offshore?] island with half-buried money in the sand... suggesting Yanukovych now has all of the levers of power necessary to put the squeeze on the offshore accounts in which Ukraine's richest oligarchs/politicians stash their loot.

Will Kolobov have any success in all of this? My hunch is not much.. Most banks are in a pretty anaemic state right noww...drawing a cash transfusion from them is not a good idea.

And squeezing your sponsors..?

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