The International Monetary Fund, in releasing today its latest memorandum on Ukraine’s progress in reaching goals set out by a $17.5 billion, four-year loan program, called for an increased fight against “vested interests” while praising greater financial stability.
“The Ukrainian economy is showing welcome signs of recovery” IMF Ukraine Mission Chief Ron van Rooden told journalists in a phone call, adding that “reforms need to be substantially accelerated.”
The IMF approved another $1 billion loan installment on the program in an April 4 board meeting, bringing the total amount loaned to Ukraine to $8.38 billion.
The memorandum agreement between Ukraine and the international lender bemoans the slow pace of change in certain areas, focusing specifically on a lack of privatization, the ongoing moratorium on sale of agricultural land and the fiscal unsustainability of the state pension system.
“Important parts of the economy are dominated by oligarchs and inefficient SOEs (state-owned enterprises), deterring competition and contributing to corruption,” the memorandum says.
In a separate conference, NBU Assistant Chief Oleh Churiy said that the central bank expects an additional $4.5 billion from the IMF over the course of 2017.
Upcoming battles
Much of the IMF’s memorandum reads like a very familiar wish list for Kyiv’s pro-Western investment business set.
On the anti-corruption front, the organization first calls for the National Agency for the Prevention of Corruption to investigate senior officials’ asset declarations and to cooperate more closely with NABU. It also demands widened investigative powers for NABU and the creation of specialized anti-corruption courts.
“Increased scrutiny of high-level officials’ sources of wealth and further strengthening the anti-money laundering framework will help detect and deter corruption,” the lender says.
On privatization, the international organization bemoans the “largely unsuccessful” process. The IMF calls for “much faster divestiture” of small and defunct state-owned companies, to be sold through an electronic platform.
“Only a small number of SOEs considered strategic should remain under state ownership, with further improvements in their governance, including the appointment of independent supervisory boards,” the memorandum reads.
The fund then calls for the moratorium on the sale of farmland in Ukraine to be lifted, saying that the country’s “comparative advantage in agriculture and related industries” will redound to its benefit should parliament “allow the sale of agricultural land.”
Van Rooden also said in the call that “Ukraine cannot afford any longer to delay pension reform,” citing demand for both higher wages and higher pension payments as pressures that were forcing the government to act on the issue. He added that Ukraine has one of the least fiscally sustainable pension systems in Europe.
“Comprehensive reforms should focus on further reducing the scope for early retirement, increasing years-of-service requirements and creating incentives for people to pay contributions and retire at a later retirement age,” the memorandum says.
Room for plaudits
The IMF did spend much of the report applauding the Ukrainian government on digging the country out of the financial hole it found itself in 2014.
“Inflation is down, and reserves have more than doubled,” Van Rooden said.
They lauded much of the NBU’s action in the wake of Ukraine’s “economic and financial meltdown,” complementing the NBU on “adeptly handling” monetary policy while writing that more needs to be done on ensuring that high rates of non-performing loans go down.
NBU Governor Valeriya Gontareva’s potential departure has also apparently stressed out the D.C.-based international lender.
The organization called for “continued strong support for central bank independence” in the memo, amid reports that Gontareva could be replaced by former Prime Minister Arseniy Yatsenyuk or former Economy Minister Roman Shpek.
But when asked about the potential change in the call, the IMF said that it would not “comment on any speculation or rumors.”
