Ukraine Bonds Crash After Economy Minister Resigns Over "High-Level Corruption"

While the rest of the world's bond yields are collapsing and prices soaring (as NIRP sweeps the globe), Ukraine's 'young' implicitly-US-taxpayer-backed bonds have plunged to record lows. The reason - aside from simply disturbing economics...

 

...is, as The FT reports, the dramatic resignation of the economy minister accusing a senior presidential ally of blocking his attempts to root out graft and stymieing his plans for reform. Abromavicius exclaimed, of the Washington-installed elite at Kiev's heart, "I realised there is an intention to unwind the process of making all of this transparent."

Speaking in Kiev, Aivaras Abromavicius said he had no desire “to serve as a cover-up for covert corruption, or become puppets for those who, very much like the old government, are trying to exercise control over the flow of public funds”.

Ukraine already ranked dismal last among European nations for Corruption (rubbing off from its Washington overlords?)

 

As The FT details, Mr Abromavicius also made an acid reference to his presentation on behalf of Ukraine at the annual gathering of economic and business luminaries at the world economic forum in Switzerland, saying:

“I am not willing to travel to Davos and talk about our successes to international investors and partners, all the while knowing that certain individuals are scheming to pursue their own interests behind my back.”

Mr Abromavicius is the highest-profile departure so far from Ukraine’s governing coalition, which is struggling to deliver on the promise of the pro-European Maidan revolution that brought it to power two years ago.

As the government has floundered, many Ukrainians have come to fear a repeat of the Orange revolution a decade earlier, when infighting and corruption dashed similar hopes.

 

Widespread anger at entrenched corruption and the slow pace of reform is sparking calls for early elections — yet the results could jeopardise attempts to implement reforms agreed under the country’s $40bn rescue package, led by the International Monetary Fund.

 

The upheaval is also threatening the peace process in eastern Ukraine, which also requires Petro Poroshenko, the president, to push unpopular measures through a hostile parliament.

 

Mr Abromavicius told the Financial Times he decided to resign after his attempts to restructure Ukraine’s state-owned companies ran into resistance from powerful figures with vested interests.

 

“We just hit a wall recently,” Mr Abromavicius said. “We have come to a point where, unfortunately, the technocrats within the government are simply no longer needed.”

And the result is a further loss of faith in the Washington-installed elite as the youngest bonds plunge to record lows...

 

And as The FT concludes, Abromavicius' allegations are already reverberating among the western allies on whom Ukraine depends to avoid default and stave off Russian pressure.

A group of ambassadors, including those representing the G7 nations, released a joint statement echoing his concerns, saying: “It is important that Ukraine’s leaders set aside their parochial differences, put the vested interests that have hindered the country’s progress for decades squarely in the past, and press forward on vital reforms.”

 

Mr Poroshenko’s reticence has particularly worried Washington, which has asked him to fire the prosecutor-general several times and threatened to make further financial support conditional on progress against corruption.

 

But a senior Ukrainian official said the allegations of Mr Abromavicius were likely to lead to a broader government reshuffling rather than early elections, despite constant political infighting.

 

“At the very least, Poroshenko is deaf to information about corruption. He will only act when society forces him to do it,” said Serhii Leshchenko, a critical MP in his party.

Balazs Jarabik, a visiting fellow at the Carnegie Endowment for International Peace, said western policymakers were also likely to back Ukraine’s coalition due to fears over Russian pressure and the country’s economic fragility. “If you push too hard, this country may not stand,” he said.