Washington – Structural reforms in Ukraine could promote the country's economic growth, as it will give a signal to investors about the efforts of authorities to create a favorable business climate, Vice President of the World Bank for Europe and Central Asia Laura Tuck has said.
The country should conduct structural reforms, and reduce the deficit
of the budget and size of the state debt, Tuck said at a press
conference as a part of the spring session of the World Bank and the
International Monetary Fund (IMF).
She said that the economic crisis in the country was provoked by the
fact that Ukraine had delayed conducting structural reforms.
The World Bank’s experts said that structural changes in the energy
sector, deregulation of the economy, and the reform of the public sector
will send a clear signal to society and investors about the serious
intents of authorities to fight corruption.
Tuck said that according to the forecast of the World Bank, Ukraine’s
GDP will fall by 3% this year. In 2015, the World Bank’s experts expect
that Ukraine’s GDP will rise by 3% thanks to the increase in business
activity.
She also said that the World Bank still plans to provide $3 billion to Ukraine in 2014 to finance reforms.
Reforms could be painful in the short-term, but they are required to ensure the stable growth, she said.
According to a report of the World Bank on Ukraine, the observation
of the requirements of the IMF by Ukraine as a part of the provision of
aid to the country could result in a fall in consumption and investment
in production, which would affect the growth pace of the economy.
All measures foreseen in the IMF aid package, including an increase
in gas and utilities tariffs, will affect the purchasing power of the
public and reduce the possibility of the government increasing the
expenses of the national budget this year. Thus, in 2014, the World Bank
expects that consumption and investment in production will fall, the
bank said.
The International Monetary Fund (IMF) has reached a staff-level
agreement with the Ukrainian leadership on opening a two-year credit
worth from $14 billion to $18 billion. Ukraine expects that the IMF
board will discuss the issue by late April. The first tranche could be
some $3 billion.
The World Bank projects that consumption in Ukraine will decline by
8%, if the country observes the requirements of the IMF. The fall in
investment in production will not be so large.
The switch to the flexible exchange rate will help cutting the gap of
the current transactions account, while a slight rise in the economies
of the key trade partners will result in the fall in demand on exports
of Ukrainian goods and services, the World Bank said.
The resumption of cooperation with the IMF and other international
partners could increase trust of investors to Ukraine and cut expenses
on foreign financing. This will lead to the stabilization of the
National Bank of Ukraine’s reserves at the level of imports over two
months, the World Bank said.
