Statement at the Conclusion of the IMF Mission to Ukraine
IMF News, November 18, 2016
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- Statement at the Conclusion of the IMF Mission to Ukraine
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- Published: November 18, 2016
Mission context and mandate
- An International Monetary Fund (IMF) mission, led by Ron van Rooden, visited Kyiv during November 3-17 to initiate discussions on the third review of the authorities’ economic reform program supported under the Extended Fund Facility (EFF) arrangement and held discussions for the 2016 Article IV consultation with Ukraine.
- End-of-Mission press releases convey preliminary findings after a visit to a country. The views expressed are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- This mission will not result in a Board discussion.
- The mission concluded that the authorities need more time to implement policies to ensure medium-term fiscal sustainability—including adoption of the 2017 budget consistent with program targets—safeguard financial stability, and tackle corruption. Discussions on these policies will continue.
Economic outlook and recent macroeconomic developments
- After a difficult period, the Ukrainian economy is showing welcome signs of recovery.
- Decisive policy actions in the past two years have led to a dramatic reduction in external and internal imbalances.
- Inflation has been successfully brought down.
- The central bank’s international reserves have increased substantially.
- Growth projections:
- growth is expected to reach 1½ percent in 2016
- growth is expected to pick up to about 2½ percent in 2017
- Per capita GDP (in PPP terms) in Ukraine is still very low—just 20 percent of the EU average, the second lowest level of all Central and Eastern European countries.
- Faster sustainable and inclusive growth is needed to recover lost ground and improve living standards.
Policy priorities and recommendations
- The authorities’ economic policies should continue to focus on:
- (i) accelerating reform of the large and inefficient state-owned enterprise sector, improving the business environment, and tackling corruption to attract investment and raise the economy’s potential;
- (ii) ensuring that wage increases are consistent with improvements in labor productivity, to safeguard competitiveness;
- (iii) continuing fiscal consolidation to ensure debt sustainability, supported by pension reform and efforts to make the tax system more efficient and growth-friendly, while improving the quality of government spending;
- (iv) maintaining a cautious monetary policy targeted at further reducing inflation and rebuilding reserves within a flexible exchange rate regime; and
- (v) repairing the financial system and reviving bank lending.
Challenges to sustaining the recovery
- The strength and durability of the recovery depend crucially on the implementation of ambitious reforms to support Ukraine’s transition to a full-fledged market economy.
- Turning the current stabilization into strong and sustainable growth will not be an easy task; past stop-and-go reforms resulted in the repeated buildup of large imbalances and economic crises.
- The authorities should remain united in their determination to continue to advance reforms, resisting populist pressures and overcoming opposition from vested interests.
- Decisive steps particularly need to be taken to fight corruption, which remains the most frequently mentioned obstacle to doing business in Ukraine.
- While there has been progress in setting up new institutions, including the National Anticorruption Bureau of Ukraine, and the publication of high-level officials’ asset declarations was a major step, tangible results in prosecuting and convicting corrupt high-level officials and recovering proceeds from corruption have yet to be achieved.
Contact
- IMF Communications Department, MEDIA RELATIONS
- PRESS OFFICER: Wiktor Krzyzanowski
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org
Statement at the Conclusion of the IMF Mission to Ukraine, Press Release No. 16/512, November 18, 2016.