KIEV, Sept. 12 – Oleksandr Savchenko, a deputy governor at the National Bank of Ukraine, resigned on Friday citing sharp disagreement with the bank’s leadership over key monetary policy issues and the hryvnia’s devaluation.

The resignation adds instability at the NBU and comes days after the first deputy governor, Anatoliy Shapovalov, qas summoned to the Interior Ministry for questioning over billions of hrynias spent on refinancing of banks.

The developments highlight the mounting political pressure on the NBU as the hryvnia has been facing significant downward pressure against the U.S. dollar.

Savchenko is thought to be loyal to Prime Minister Yulia Tymoshenko, who has been increasingly distancing herself from the hryvnia’s troubles ahead of the next presidential election.

“Right now the NBU is not an independent institution,” Savchenko said at a press conference Friday explaining his resignation. “Unfortunately, it’s involved in politics, and sometimes – through certain transactions – in commerce. This is unacceptable.”

President Viktor Yushchenko earlier this month warned that the government’s pressure to force the NBU to print about 10 billion hryvnias before the end of the year is causing major downward pressure on the hryvnia.

Yushchenko urged the government to cut budget deficit to levels that can be handled without the monetary emission.

But Savchenko turned on the Yushchenko office for “interfering” with the NBU’s policy, and said this interference and some other factors have been causing expectations of devaluation.

“This all is leading to the devaluating and inflation, to the people’s distrust towards the national currency because there is no money without the trust,” Savchenko said.

These allegations and Shapovalov’s questioning last week mark increased pressure on the NBU as the central bank is to adopt policy decisions that may have impact on the hrynia’s value.

The hryvnia’s performance appears to be a factor in the upcoming presidential election, explaining the increasing focus on the institution, analysts said.

The hryvnia lost value last week to 8.8 hryvnias per U.S. dollar in trading between commercial banks, before somewhat recovering somewhat following robust interventions from the NBU.

The hryvnia is trading at 9 hryvnias per dollar in currency exchange kiosks on the streets of Kiev, a sign of panic suggesting there was room for further depreciation.

But Tymoshenko said Saturday the median exchange rate next year should be at 7.5 hryvnia to the dollar, an attempt to send a reassuring message to support the local currency.

Weeks ago Tymoshenko has insisted that the hryvnia’s fair value is at 6 hryvnias per dollar, adding that it was the fault of the NBU – not the government – for the hryvnia being much weaker than that.

Shapovalov was questioned allegedly for his role in disbursing about 40 billion hryvnias in refinancing cash to banks that had appeared under the water when the economic crisis had hit Ukraine in November 2008.

Yuriy Lutsenko, the interior minister and Tymoshenko’s close ally, announced on television the plans to question Shapovalov, sending shivers through currency markets.

“I am not welcoming the fact that the questioning has received a public character,” Petro Poroshenko, the head of the NBU’s Council, a strategic policy body, said.

The developments come amid uncertainty over whether the NBU will print 10 billion hryvnias within the next three months as the government has requested to finance infrastructure projects.

Yushchenko, who said the money printing is the only remaining “threat” to the hryvnia, urged the NBU to ignore the pressure and to refuse to buy Treasury bills.

The government relies on the money printing amid weak budget revenue this year. Ukraine’s budget revenue fell sharply – by up to 20% - this year as many businesses had to shut down or stay idle as the economy had contracted 20.3% on the year in the first quarter.

The government managed to finance most of expenditures this year by borrowing from the International Monetary Fund, collecting taxes early from state companies and massively postponing tax rebates to exporters. (tl/ez)