Ukrainian Economy Minister Aivaras Abromavicius tendered his resignation on Wednesday out of frustration that major government reforms were being blocked, the latest sign of fracturing in the coalition government. Picture: REUTERS
Ukrainian Economy Minister Aivaras Abromavicius tendered his resignation on Wednesday out of frustration that major government reforms were being blocked, the latest sign of fracturing in the coalition government. Picture: REUTERS

UKRAINE’s government, splintering over issues from the war in the nation’s east to faltering anticorruption efforts, suffered a new setback as its reform-minded economy minister stepped down.

Aivaras Abromavicius, a Lithuanian-born former fund manager, said on Wednesday that he would not be a "puppet" for officials he accuses of blocking overhauls of the former Soviet republic’s economy and institutions. He said politicians, including one from President Petro Poroshenko’s party, had pressured him to appoint "dubious people" at state-controlled companies. Government bonds slumped after his comments.

The minister’s departure underlines growing dysfunction in Ukraine. The administration that took power in 2014 after a wave of pro-European protests has become bogged down by infighting and criticism over a lack of progress to rein in the vested interests that have controlled much of the economy for decades.

Mr Poroshenko, who must deliver reforms to maintain the flow of financial aid from allies such as the US and the European Union, has promised personnel changes in the cabinet this month.

"This is a point of no return for perceptions of Ukraine as a country implementing reforms," Sergey Fursa, a bond trader at investment bank Dragon Capital in Kiev, said by phone. "Mr Abromavicius’s resignation will lead to a decline in western partners’ confidence that will cause trouble for the country’s access to international financing."

The news brought losses for government debt. The yield on dollar-denominated bonds due 2019 jumped 39 basis points to 10%, the biggest daily increase in more than seven weeks on a closing basis. The hryvnia gained 0.8% to 25.7/$, recovering from an 11-month low on Tuesday.

Mr Abromavicius, whose predecessor also left citing frustration over reforms, was one of several foreign citizens drafted into Ukraine’s post-revolution government to add impetus to plans to steer the nation away from its Soviet past. Announcing his exit, he accused officials of seeking to gain control over cash flows at state energy producer NAK Naftogaz as well as government-run enterprises in the defence industry.

"My team and I don’t want to be cover for blatant corruption or controlled puppets for those who want old-style government to establish control over public finances," Mr Abromavicius told reporters. "It’s not just a lack of support or political will. These active steps are aimed at paralysing our reforms."

Svyatoslav Tsegolko, a spokesman for Mr Poroshenko, did not answer calls to his phone when Bloomberg called for a response to Mr Abromavicius’s remarks.

Geoffrey Pyatt, the US ambassador in Kiev, called Mr Abromavicius "one of the Ukrainian government’s great champions of reform."

Ukraine’s efforts to stamp out corruption brought scant progress last year, according to Transparency International, which said in January that civil society, journalists and whistle-blowers were more effective than government officials in combating graft.

The nation of 43-million people ranked 130th of 168 countries in the Berlin-based watchdog’s Corruption Perceptions index, level with Iran and Cameroon.

The results of Ukraine’s anticorruption endeavours will be assessed by legislators during the week of February 15, when Prime Minister Arseniy Yatsenyuk is scheduled to report to parliament on his cabinet’s performance. The premier, whose party won the biggest share of votes in elections in 2014, has seen his approval rating plummet to 1% as Ukrainians vent their disappointment and growing disillusionment following the revolution.

Bloomberg