Ukrainian Economy in Brief – Newsletter, 30 May, 2023

The Committee on Finance, Tax and Customs Policy approved for the first reading of draft law (DL) #9269 on financial monitoring of politically exposed persons (PEPs) in Ukraine.

As was predicted earlier, the requirement under the 14th benchmark of the Memorandum with the IMF raised a tough discussion among members of the Committee. But the Committee ended up supporting the government version of the DL which suggests treating a person as a PEP for an indefinite term.

The DL is currently included in the agenda of the next plenary session, which will take place in the last days of May. However, it seems to be hard to find enough votes and I suppose the DL won’t be considered this week.

New DL on the corporate governance reform at the Gas Transmission System Operator (GTSO) was submitted to the Parliament. DL #9311-1 was submitted by Maksym Khlapuk and me as members of the Parliamentary Network of the WB and the IMF and designed with the help of corporate governance experts Andriy Boytsun and Aleksandr Lysenko.

Key differences of the new DL are the following:

- independent members should make up the majority of the newly elected Supervisory Board of the GTSO;

- the new Supervisory Board of the GTSO has exclusive rights to appoint Board members (not the Ministry of Energy, nor the supervisory board of MGU can do this);

- MGU lost its exclusive right to propose amendments to the charter of the GTSO, all the amendments to the GTSO charter should be approved by the Energy Community Secretariat;

Other Topics of Interest

German Economy Minister Makes Unexpected Visit to Kyiv

The trip comes after Germany announced it was sending an additional Patriot air defense system to Ukraine after pleas from Kyiv for its Western backer to urgently help foil Russian attacks.

- the DL suggests sanctions if a new Supervisory Board of the GTSO isn’t selected and appointed by 31 October 2023.

These provisions give an opportunity to meet the requirements of the Memorandum with the IMF.

I’d like to emphasize that to meet the deadlines set in the Memorandum, DL #9311-1 should be adopted as soon as possible.

The DL on the development of capital markets was approved for the second reading. The Committee on Finance, Tax and Customs Policy recommended DL #5865 for voting in the Parliament.

The DL meets the objectives outlined in paragraph 22 of the September 2016 MEFP and allows Ukraine to become a signatory of IOSCO’s multilateral MoU by the end of December 2024. 

The DL should have been considered on Monday, May 29, but the Deputy Head of the Office of the President of Ukraine Rostyslav Shurma initiated its withdrawal from the agenda. As far as is known, he objects to the requirements for the National Securities and Stock Market Commission (NSSMC) employees.

Other key economic issues

Investments in Ukraine will be insured. The Committee on Finance, Tax and Customs Policy approved DL #9015 which enables the Export Credit Agency to insure Ukrainian investments from the risks related to the ongoing war in the country. It guarantees that the state will support business in Ukraine more actively.

The Verkhovna Rada will reconsider DL #9107-1 on nationalizing banks of sanctioned owners before the end of May. The Committee on Finance, Tax and Customs Policy approved, for the second time, DL #9107-1.

The committee rejected norms related to the ability of the National Bank of Ukraine (NBU) to withdraw a license and liquidate banks which are not considered as SIBs in case of their connection with persons under sanctions. 

The DL on fair payment for Ukrainian defenders is going to be submitted to the Verkhovna Rada. The working group is ready to finalize and submit the DL with the mechanism of payment raise for several categories of military servants.

As we previously reported the DL will be considered instead of amendments in the DL #8312 which set a salary cap for civil servants and state-owned enterprise (SOE) employees. The MoF should calculate the exact budget expenses needed to cover such additional payments. Preliminarily, the implementation of these  proposals will require an additional budget outlay of Hr.10 billion in the year 2023.

The Cabinet of Ministers improved the mechanism for using funds from the Destroyed Property and Infrastructure Restoration Fund collected via the United24 project. In particular, the recent amendments give the possibility to transfer funds for use by another administrative authority.

The CoM also obliged such authorities as well as the Ministry of Infrastructure to publish monthly reports on revenues and expenditures of these funds on the website.