In the short run, Ukraine’s economy is looking good.
In the long run, it’s not looking good — unless Ukraine’s leaders make decisive reforms in cutting the pension deficit, creating an agricultural land market, selling of state-owned enterprises and creating an anti-corruption court.
Those were the findings of the recently completed International Monetary Fund mission, in Kyiv to assess Ukraine’s progress in meeting conditions for another installment in its $17.5 billion credit line through the end of 2018. So far, IMF has lent Ukraine nearly $8.4 billion under the four-year recovery program.
The good news from IMF mission chief Ron van Rooden: “The Ukrainian economy continues to recover, with growth expected to exceed 2 percent in 2017. Fiscal and monetary policies remain on track to meet the 2017 targets. Gross international reserves have increased further to $17.6 billion, and inflation is projected to fall below 10 percent by the end of the year.”
And the more challenging news: “The mission held constructive discussions with the authorities on reforms needed to improve productivity, attract investment, and continue to strengthen public finances. As envisaged under the program, discussions focused on the pending pension and land reform and on measures to speed up the privatization process and ensure concrete results in anticorruption efforts. While good progress has been made in building understandings on the key elements of these measures, further technical work is needed in some areas to transform these into draft laws that meet the reform objectives. Securing parliamentary approval of these draft laws will be needed to pave the way for the completion of the fourth review. IMF staff, in cooperation with other international partners, will remain closely engaged with the authorities in the coming weeks to advance the reform agenda.”
London-based analyst Timothy Ash called the IMF findings “pretty much as expected” and said “July looks like key month on legislative front.”
Ash said that Ukrainian Prime Minister Volodymyr Groysman “will have to pull off some magic to get all this through the Rada before deputies jet off for” summer vacations abroad.
The problem, Ash wrote, is that “the ruling coalition lacks a working majority – so might have to reach out to members of the Opposition Bloc” — whose members are tied to ex-President Viktor Yanukovych and Ukrainian billionaire oligarch Rinat Akhmetov.
Ash wrote that the legislative agenda demanded by the IMF is “more likely” to drag into autumn.
“On the anti-graft agenda, the administration needs to collect in the numerous ‘get out of jail for free cards’ which seem to have been sprayed around in the past by various administrations. In Ukraine there are always plenty of investigations, a few prosecutions, but then no one ever seems to go to jail.,” Ash wrote. “Funny place, Ukraine.”
“For the next week we have more legal trysts between the Russians and Ukrainians, with legal battles today in London over the $3 billion December 2015 eurobonds, and the Stockholm Arbitration Court expected to rule on the gas/transit and supply cases. Gazprom has lodged a $45.7 billion claim against Naftogas, and Naftogas a counter claim for $17.9 billion.”
