KIEV, Ukraine -- Ukraine's Interior Ministry said Thursday it was investigating the central bank for allegedly squandering tens of millions of dollars earmarked to support the country's crisis-hit currency and the banking sector.
It was the latest sign of a paralyzing tug-of-war between the president and prime minister that has exacerbated the country's severe financial downturn.Interior Minister Yuriy Lutsenko said in a statement he suspected National Bank officials of "plundering hundreds of millions of hryvna" and causing a drastic fall in the value of the national currency. The hryvna lost about 5 percent of its value the dollar in recent weeks.No other details of officials' alleged wrongdoing were made available.Lutsenko said he has summoned for questioning the first deputy chairman of the National Bank, which is currently held by Anatoliy Shapovalov.Shapovalov's office and other National Bank representatives declined immediate comment.Observers said Thursday's developments are part of a wider political battle between factions loyal to Ukraine's president and prime minister.Lutsenko is allied to Prime Minister Yulia Tymoshenko, while Shapovalov is seen an ally of President Viktor Yushchenko.While the two warring leaders continue bickering ahead of upcoming presidential elections in January where both have declared they will run - the economy is slipping further into peril, experts warned."I am not sure that questioning the central bank deputy governor sends out a very good message," said Timothy Ash, head of emerging market research at Royal Bank of Scotland ( RBS - news - people ). "This just adds to the impression that the National Bank of Ukraine and government are not working well together."The hryvna fell from about 8.4 to 8.9 to the dollar last week due to growing political instability, debt problems at the state energy firm Naftogaz and warnings from the International Monetary fund that it might withhold the next installment of its $16.4 billion rescue loan.But the currency has rallied in recent days thanks to central bank intervention, closing at 8.4 on the foreign currency exchange Thursday.Ukraine has been hit particularly hard by the global downturn, as its export-oriented economy suffered from a plunge in the global demand for steel and chemicals.
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