7:23 AM Saturday, May 26, 2018
​Ash Critique of FT's Rosy View on Ukraine
FT: Ukraine’s reform drive is powering ahead
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

A much more nuanced story than this I am afraid.

Some fantastic achievements to date - energy sector reform (Naftogas), bank/NBU reform, fiscal consolidation, Prozorro, and getting AA/DCFTA and visa free travel are big wins. Having spent 30 years covering Ukraine, I never expected to see some of these reforms done in such a short space of time. It shows what can be done.

Ukraine's No visa generation: On June 11, day one of Ukrainians' 'No Visa' travel regime with the EU, three children pose in Kyiv's Boryspil airport before flying west for a summer vacation. (UNIAN/Vladimir Gontar)

But at the same time, we are seeing something of a stalling, or rather watershed now in terms of reform momentum - as reflected by the fact the IMF program is stalled at the moment, after the 3rd review from April.

Pension reform, land reform, the anti-corruption agenda, privatization, energy price adjustment (as per prior commitments) are still hanging in the balance.

Plus there is still no new NBU governor, five months after Gontareva left. The fact that David Lipton the IMF MD is coming to Kyiv next week says it all really. He only comes if a program is going really well -- on track -- or there are concerns.

In the Ukrainian case, we are in the latter camp. So I think there is a need for President Poroshenko to more convincingly nail his colors to the reform mast, supporting the likes of Finance Minister Danylyuk, et al.

Reforms done to date show that Ukraine can reform. It is not un-reformable, as some suggest. But that suggests the IMF should push the government to be ambitious and deliver.

The obvious concern is that Ukraine is moving into election mode, and the IMF program will be put on the back burner -- especially given expected success in re-accessing international capital markets this week.

On that latter point, Ukraine should not get ahead of itself. Success in international capital markets is all about a reflection of reform progress.

But is just as much, if not more, about the current flush global liquidity concerns. It should actually use these same buoyant global liquidity conditions to push ahead with difficult reforms. The Yanukovych administration failed back in 2011-2013 in that respect. The proof of the reform pudding is in the current 2.5% real GDP growth trend which, from a very low base, is very disappointing.

Timothy Ash is senior sovereign analyst for BlueBay Asset Management in London

FT: Ukraine’s reform drive is powering ahead

Corruption persists but EU support and local efforts have spurred progress elsewhere

by: Volodymyr Yermolenko and Ruslan Minich

After the lengthy saga of its signature and ratification, the Association Agreement between the European Union and Ukraine finally came fully into force on September 1.

This is, probably, the most dramatic EU deal with a non-EU country.... the EU’s share in Ukrainian exports has jumped to more than 40 per cent, from about 25 per cent four years ago.

Differences in food safety requirements between the EU and Ukraine remain an important obstacle. But things are changing here too: 281 Ukrainian producers have so far proved that their food and non-food goods meet EU standards. Ukraine is now transferring EU norms into its legislation to eliminate differences in safety requirements....

... However, in the fight against corruption, progress is still slow. The EU-Ukraine Association Agenda requires anti-corruption reform; it was also one of the conditions for the EU visa waiver and IMF loans. Ukraine has established some anti-corruption institutions but they remain fragmented. Anti-corruption courts and efficient corruption prevention are lacking, and some anti-corruption activists suffer legal persecution and misinformation attacks.

Volodymyr Yermolenko and Ruslan Minich are analysts at Internews Ukraine and at UkraineWorld, an information and networking initiative.

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