KYIV, July 1 – Yakiv Smolii, the governor of the National Bank of Ukraine, on Wednesday submitted his resignation, citing “systematic political pressure” in development that threatens to undermine independence on the central bank.

Smolii for the past four months remained essentially the only reformist figure in charge of a major state institution in Ukraine following the surprise reshuffle of the government in February.

“This is a very sad news for Ukraine,” Anders Auslund, a senior fellow at the Atlantic Council in Washington, said Wednesday.

The resignation sent shockwaves through the Ukrainian business and financial community, with Dragon Capital, one of the biggest investment banks, planning to postpone all investments in the country.

“We will now postpone all new investments,” Tomas Fiala, the head of Dragon Capital, said. “For the past five months the authorities have been doing the exact opposite of what investors, both domestic and international, expect from them and advise them. This is the last straw.”

In his letter of resignation to President Volodymyr Zelenskiy, Smolii said it has become impossible for the central bank to effectively cooperate with other state agencies.

“For a long time, systematic political pressure has been exerted on the National Bank of Ukraine,” Smolii said. “With my resignation, I seek to warn against other attempts to undermine the institutional foundations of the central bank in Ukraine.”

The NBU has been the driving force behind significant macroeconomic progress in recent years.

“Ukraine has long suffered from high inflation and an unstable or unsustainable exchange rate.,” Auslund said. “Smolii fixed both problems.”

Under his leadership, Ukraine’s inflation has fallen to the current level of 1.7% a year, the lowest ever recorded in independent Ukraine.

With a floating exchange rate, the hryvnia currency has now stabilized at close to 27 hryvnia per US dollar. Ukraine’s international currency reserves have surged to $28 billion from a low of $5 billion in 2015.

Ambassadors of the G7 countries issued a statement on Wednesday in strong support of independence for the central bank.

“An independent National Bank is a foundational achievement for Ukraine that has reduced corruption, driven growth & rescued a failed banking sector,” the ambassadors said. “To undermine this crucial institution would be a big step back and jeopardize the credibility of and support for Ukraine‘s reforms.”

Analysts said that Smolii’s resignation may be the result of the continued pressure from powerful businessman Ihor Kolomoyskiy, who sponsored Zelenskiy’s presidential campaign. Kolomoyskiy has been unsuccessfully trying to return his Privatbank, which was nationalized in 2016.

“Smolii has adopted uncompromising positions towards Zelenskyy’s alleged oligarch ally Kolomoiskiy,” Auslund said. “The NBU governor’s resignation now strengthens suspicions that Zelenskyy is unable to say no to Kolomoiskiy.”

Others said that perhaps incompetence of Zelenskiy’s economic team triggered the resignation or Russia may have played a role.

“One can only guess what the motives are,” Fiala said. “It is either complete incompetence or sabotage motivated by Russia.” (tl/ez)