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Independence Square in Kiev, Ukraine

Ukraine has been working through the reforms required as part of a $17.5bn rescue package from the fund, agreed in 2015, to help its economy recover from a dramatic contraction, worth almost 16% of GDP.

But the process has been dogged by an ongoing conflict with Russia, repeated delays in legislating reforms and political turmoil as the government tries to steer Ukraine away from the corruption and cronyism of its past.

Speaking yesterday at the conclusion of a visit to Ukraine, Ron van Rooden, who leads the IMF’s work with the country, stressed again the importance of the “decisive implementation” of reforms, namely on pensions, land and anti-corruption.

This would pave the way for Ukraine to receive the next tranche of money under the programme, with the IMF expected to disburse a further $4.6bn this year, on top of $1bn already delivered in March.

While the country has already made significant progress on measures to combat graft [a political form of corruption] – which previously seemed so hard to achieve the IMF threatened to cancel its programme – it still has some way to go, and faces hefty resistance from within.

The parliament, the Rada, recently tabled a bill that observers said would leave the country’s key anti-graft agency hamstrung, enabling others like the Security Service of Ukraine (SBU) – thought to be controlled by vested interests – able to take over and shut down if they wished.

Lawmakers eventually bowed to pressure, including from international observers who said the bill was meant to protect powerful politicians and businessmen, and shelved the bill.

Ukraine’s coalition government regularly struggles to win the needed backing of lawmakers to follow through on its reform pledges.

Reform to Ukraine’s pension system, which van Rooden has previously pointed out is draining the public finances, is highly controversial, and the Rada rejected draft land reform proposals by 226 votes to 17 earlier this month.

“Securing parliamentary approval of these draft laws will be needed to pave the way for the completion of the fourth review [into Ukraine’s compliance with the programme,” van Rooden explained, noting further technical work is needed in some areas for proposals to meet reform objectives.

Meanwhile, Ukraine’s economy is recovering. The fund said growth is expected to exceed 2% in 2017, the country remains “on track” to meet fiscal and monetary targets, and international reserves have increased, especially with the $1bn bailout payment secured earlier this year. 

“Inflation is projected to fall below 10% by the end of the year,” van Rooden continued. “While the near-term outlook is positive, decisive implementation of structural reforms remains critical to achieve stronger and sustainable growth that Ukraine needs over the medium-term.”