There are so many fires that Ukraine receives almost no attention from the international community. In fact, the situation is not comparable to that which was three years ago, when Russia annexed the Crimea and in Eastern Ukraine broke out initiated by the Moscow war. The conflict continues to smolder. But, at least, the economy the worst is over. After a deep recession, which was a heavy blow for the population, in 2015, the country finally returned to economic growth. The local currency the hryvnia has stabilized, and previously high inflation rates have fallen markedly.
The lack of progress
Politicians have been able to overcome the phase of economic stabilization. This would be followed by a period of fundamental structural reforms. Because Ukraine, which was never able to completely get rid of its Soviet heritage still has not created a functioning market economy. “The pace of structural reforms must now increase dramatically,” said the local representative of the International monetary Fund (IMF), Your Jerome (Jérôme Vacher). Without the IMF as the largest international donor to Ukraine is unlikely to have survived the serious crisis of recent years.
But not as bad. Last week the IMF gave Kiev the fourth loan assistance in the amount of $ 1 billion, and carried out a comprehensive assessment of the situation. The fact that the IMF continues to support Ukrainian policy explains Your progress in some areas. The government and the Parliament passed a solid budget for 2017. National Bank eliminated a serious threat to financial stability, nationalized the largest Bank “PrivatBank”, which became insolvent.
Subsidized gas prices for the population were abolished, and it destroyed the source of corruption and budget deficit. The new law obliges public servants to declare their income and assets. The improvement is in small areas; the new Ombudsman struggles against the oppression of public bodies, which, for example, require bribes or refuse to return VAT. The population was noted as a great success that the EU has recently, finally, gave the Ukrainians a long-awaited visa-free entry.
However, progress is insufficient. Groisman a year led by the new government, and during that time, the pace of reform slowed down. This is reflected in a recent assessment of the IMF, according to which Ukraine has not fulfilled 8 out of 11 goals. The decline in the pace of reforms indicates the reforms index, compiled by the organization “VoxUkraine”.
The struggle with resistance
With a lot of resistance encountered, first of all, major structural reforms. So, still not held required the privatization of many state enterprises. Connected oligarchs and many politicians do not want to lose the opportunity to devastate the company at the expense of the state budget. At the same time, the fight against endemic corruption advances very slowly. The country has created new and promising bodies such as the National anti-corruption Bureau (NAB). But the Ukrainian elite is trying to sabotage their work. If the start of the investigation of any cases, they usually disappear in the notoriously corrupt courts. “The courts are the weakest link,” — said the IMF representative Your. “That will not be able to develop no functioning legal state.”
Corruption slows down economic growth
Corruption and lack of rule of law — the main reasons for the lack of improvements in the business and investment climate in the country. “Many foreign investors remain on the sidelines and wait,” says Your. What can cause a stiff fight against corruption, the IMF has shown in his comprehensive analysis. According to estimates, real economic growth in Ukraine may reach around 4% per year, if corruption is reduced to the Central European level. Economically, the country will be able to approach the level of the West.
However, the challenges remain enormous: even strong reforms will require a minimum of one generation to Ukraine could be compared to one of the countries of the region [of the West]. So now the IMF has a lot of pressure. In its latest estimate, the Fund is obliged Kiev to carry out a more ambitious plan of structural reforms. By the end of June should be set up special anti-corruption court and expanded the powers of NABU. In addition, the IMF insists on faster progress in areas in which, according to Your, too long delayed reform. Privatisation is expected to begin in mid-year. In addition, until the end of April, Kiev must agree on the reform of the pension system and, finally, reform of land legislation.
A recent intention has failed, as faced with the resistance of the population. For serious reform of the pension system, the government will need to persuade citizens that painful cuts are inevitable. The example shows how important it is that the government has carried out reforms in all spheres. Three years ago, people came to Maidan in Kyiv to put an end to corruption. But still not seen much progress. If the political elite did not disappoint citizens in this matter, they probably would be willing to make painful reform of the pension system.
A holistic approach to reform will also be important from an economic point of view. The IMF representative stressed So that it should not remain incomplete. Otherwise, Ukraine will not be able to take steps towards sustainable growth. On the one hand, we are talking about stimulating economic growth, foreign trade, without a repeat of past mistakes. For this, Ukraine needs, above all, more intensive inflow of direct foreign investment — and therefore more attractive investment climate. On the other hand, it is about holistic growth. Necessary features not only to a handful of oligarchs, but also for the entire population, says Your.
The prospect of political turmoil
But first, the government will survive the next few weeks. After a year of management, in April, the government, we can declare a vote of no confidence. In Kiev are wondering whether there will be a rearrangement in the Cabinet, or it comes to the complete collapse of the entire government. Meanwhile, the government should use this short time to start the necessary structural reforms. This means that the coming weeks will be crucial for Kiev.