Ukraine’s government plans to stabilise the country’s finances by 2016. “I am optimistic,” said Ukrainian finance minister Natalie Jaresko, “because it is possible – but only possible with successful debt restructuring”.
Following a popular revolution and Russia’s annexation of Crimea in 2014, Ukraine’s foreign reserves plunged 63% and its currency, the hryvnia, was devalued by half. Capital investment dropped by 80% in 2014, and real gross domestic product fell by 6.8%. Fears of default on international loans loom as Ukraine’s hard currency reserves are down to $7.5bn. Experts predict further inflation and another recession in 2015 before any sustained growth can take place.
“The challenge that we face is to deliver reforms quickly enough that the Ukrainian people’s everyday lives will start to improve again,” Ms Jaresko said. “When structural reforms enable the economy to grow, that growth can then change the everyday lives of Ukrainians.”
Reforms include restructuring weaker banks, eliminating corruption, and pursuing privatisation and tax policy reform to improve the investment climate. Ms Jaresko also stressed the need to adopt a more fiscally responsible budget, “reducing the budget of the state but also the budget deficit of NaftaGaz, the state-owned monopoly”.
Ukraine recently adopted a law bringing their oil and gas monopoly in line with a recent EU package, which means dividing it into three branches – transportation, distribution and exploration. “We’ll be able to bring foreign investment into each of these sectors now,” Ms Jaresko said, “so energy is a critical area.”
Ukraine sold three different 3G licenses this year, a success in turning around grim FDI prospects, according to Ms Jaresko. “Despite the difficult environment and geopolitical conflict, we have strategic assets that have nothing to do with the east and are still of great value.”
Anti-corruption efforts are a crucial part of Ms Jaresko’s reform path. So far, the government has established a new anti-corruption bureau and eliminated individual sector privileges, implemented an electronic VAT filing system, and strengthened law enforcement. “It is incredibly important to the international community and our civil society that we make serious changes,” she emphasised.
US credit guarantees and the International Monetary Fund’s $17bn financial aid package are vital lifelines for Ukraine, and Ms Jaresko stressed the need for continued support. “Ukrainian people are every day going to the front, and people need to know that. It is critical that the world continues to stand with Ukraine financially, in humanitarian aid, military support, and consistent philosophical and political support.”