Ukraine: Reforms and Roadblocks

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Ukraine: Reforms and Roadblocks

The Transatlantic Task Force on Ukraine held a webinar addressing the current status of reforms in Ukraine and roadblocks that are hindering the country’s economic growth.   As the government deals with the health and financial burdens of the Coronavirus pandemic, the Ukrainian Parliament is poised to vote on a banking law that should unlock billions of dollars of International Monetary Fund loans and assistance from other institutions for Ukraine. The law would prevent the return of nationalized banks to their previous owners.

In his remarks during the May 11th discussion, Jonathan Katz (Senior Fellow, German Marshall Fund) underscored that these are “turbulent times” for Ukraine and for partners of Kyiv who are trying to support Ukraine’s reform efforts amid the Coronavirus crisis and the ongoing war with Russia in the Donbas.  “There’s a great deal of support for Ukraine, obviously, in Washington” – in Congress and the Administration — he said. As an example, Mr. Katz welcomed the expected appointment of a new U.S. ambassador to Ukraine (Keith Dayton) and the continued engagement of Secretary of State Mike Pompeo and other U.S. officials with Ukrainian leaders. But Ukraine needs to keep moving forward and although the West is pre-occupied with COVID-19, it will not be shy about pressing Ukraine on reform implementation, he suggested.

Orest Deychakiwsky (Co-Chair of the U.S.-Ukraine Foundation’s Friends of Ukraine Network Democracy and Civil Society Task Force) expressed concerns about Ukraine’s continued commitment to reforms, citing the recent dismissal and “questionable investigations of pro-Western reformers” noting that “politically motivated prosecutions and selective justice have not served Ukraine well. They undermine Western support, they subvert the rule of law and economic progress,” harming Ukraine’s national security.  Meanwhile, those involved in large-scale corruption that does severe economic damage and those responsible for the murder of peaceful protesters on the Maidan and NGO activists are “let off the hook,” he said.

Ihor Burakovsky (Co-Chair, Reanimation Package of Reforms Coalition Board and Chair, Institute for Economic Research and Policy Consulting) talked about the stabilization of the economy during the Poroshenko presidency and continuing through the premiership of Oleksiy Honcharuk under President Zelenskyy.  However, due to the economic crisis caused by the Coronavirus pandemic it will be very difficult for Ukraine to stabilize the situation and move forward without International Monetary Fund (IMF) support.  The IMF projects a 7.7% decline in economic growth in Ukraine this year, he explained. Some politicians are blaming economic problems caused by COVID-19 on previous reforms and use the crisis as an excuse for reversing them.  Dr. Burakovsky raised concerns about “a non-transparent web of relations” in the government’s policy decision-making process and its impact on the reform process.  He noted that the president’s majority in Parliament is not monolithic and that Volodymyr Zelenskyy has successfully turned to other parties for support.

Serhiy Fursa (Specialist in Sales of Debt Securities, Dragon Capital) said that he is 99% certain that the banking law will be passed by Parliament. It is also known as the anti-Kolomoysky law because it would prevent the oligarch from regaining control of Privatbank, his nationalized bank. Without COVID-19 and the economic crisis that it caused “we never would adopt this legislation,” argued Mr. Fursa.  But he is 100% certain that the constitutionality of the law will be challenged by those who oppose it.   Serhiy Fursa stressed that many of the reforms that were adopted over the last six years were passed due to Western conditionalities regarding assistance and, unfortunately, most people do not understand the importance of these reforms. He noted a palpable negative change in Ukraine’s commitment to reform in recent months, which is very disappointing to business, and he does not currently expect any new reform initiatives.

Maria Repko (Deputy Director, Center for Economic Strategy) believes the banking law will be passed “because the IMF and the other institutional lenders… have a very big leverage over the Ukrainian government now, because the funding gap is huge.”   Ukraine has to find about $20 billion dollars, she explained.  The strains on the budget include the need to repay international debts and the creation of a $2.4 billion Coronavirus fund.  Ms. Repko is concerned that the recent government shakeup negatively impacted the leadership and institutional capacity necessary to push forward with reforms and deal with the crisis, so it’s important that Western technical support be continued.  She also stressed the importance of maintaining the independence of the National Bank of Ukraine, noting its success in keeping the banking system stable during the pandemic.

When asked about President Zelenskyy’s appointment of former Georgian President Mikheil Saakashvili to the Ukrainian National Council of Reforms, Denys Denysenko (Executive Director of the Reanimation Package of Reforms Coalition) said he views it as an opportunity for re-engaging civil society in the reform dialog.  He stated that it is important for the expert community to provide the government with ongoing feedback on the country’s reform efforts.

The Transatlantic Task Force on Ukraine includes the German Marshall Fund, the U.S.-Ukraine Foundation’s Friends of Ukraine Network Democracy and Civil Society Task Force, the Reanimation Package of Reforms and other Ukrainian NGOs.  Olena Prokopenko, a Ukrainian reform expert, helped organize the virtual event.  Stela Leuca of GMF served as a moderator.

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To view a recording of the webinar click here.