## Ukraine: Owning the Reforms

_IMF News, September 26, 2017_

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**Canonical URL:** [Ukraine: Owning the Reforms](https://www.imf.org/en/news/articles/2017/09/25/na092617-ukraine-owning-the-reforms)

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## Bibliographic details
- Published: September 26, 2017

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### Context and recent stabilization
- Ukraine returned to growth last year after political upheaval, economic crisis, and military conflict.
- The government implemented tough measures to stabilize the economy with the support of a $17.5 billion IMF credit line.
- The country is at the mid-point of an IMF program; the challenge is to carry reforms forward from stabilization to sustained higher growth.

### Lessons from the reform period
- Reform focus over the past three years enabled the return to growth despite adverse conditions (military aggression, political turmoil, unstable commodity markets).
- The principal lesson: "we cannot stop halfway" — structural reforms must continue to revive the economy and raise living standards.
- Initial reform justification relied on IMF requirements; sustaining momentum now requires ownership and domestic commitment to the reform agenda.

### Social impact and political economy
- Early reform effects included lower incomes due to economic decline and currency depreciation.
- Energy-sector reform raised gas rates to market levels; as a result, more than 50 percent of Ukrainians now receive subsidies.
- Public expectations have shifted: citizens now expect a government that knows and is committed to its agenda, and failure to implement reform undermines credibility.

### Institutional and sectoral reform priorities
- Healthcare:
  - Current system: in theory free, in practice expensive due to unofficial payments.
  - Objective: formalize reforms to deliver "world-class healthcare," ensure doctors receive decent legal salaries, involve private finance, and provide a state-guaranteed insurance package for those who cannot afford care.
- Education:
  - Problems: day-to-day corruption (informal payments), inefficient funding allocation.
  - Reform direction: change funding mechanisms from financing buildings to financing services provided to real students.
- Tax and customs administration:
  - The Ministry of Finance changed the value-added tax (VAT) refund system to be transparent, electronic, and fully automatic to eliminate corruption and improve business climate.
  - An international consultancy and an external supervisory board (including representatives from the Custom-Border Protection of the U.S. Treasury; Germany’s Ministry of Finance; the European Commission; the European Bank for Reconstruction and Development; and the government of Canada) are engaged to ensure reform progress and prevent derailment.
- Law enforcement and anti-corruption architecture:
  - Current system described as oppressive and corrupt; largely a 20th-century structure unsuited for a liberal economy.
  - Proposal: create a compact analytical financial investigation unit of no more than 3,000 people to replace a huge army of more than 15,000 people across agencies investigating serious economic crimes.
  - Establish a specialized anti-corruption court to handle graft offenses and demonstrate seriousness in the fight against corruption.

### Political challenges to sustaining reforms
- Reduced external pressure (perceived lower Russian economic pressure) makes political consensus harder to sustain.
- Domestic ownership and communication of reform benefits are crucial because referring to the IMF alone is no longer sufficient to push reforms through Parliament.

*IMF Country Focus — September 26, 2017. Interview with Minister of Finance Oleksandr Danyliuk.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [conference](http://www.imf.org/en/News/Seminars/Conferences/2017/04/28/reaccelerating-convergence-in-central-eastern-and-southeastern-europe)
- [Octavian Armasu](http://www.imf.org/en/News/Articles/2017/09/05/na090617-moldova-back-from-the-brink-and-getting-better)
- [Boštjan Jazbec](http://www.imf.org/en/news/articles/2017/09/06/na091217-slovenias-central-bank-governor-institutions-are-the-people-who-govern-them)
- [Martina Dalić](http://www.imf.org/en/News/Articles/2017/09/18/na091917-croatian-economy-be-dynamic-not-only-in-tourism)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/09/25/na092617-ukraine-owning-the-reforms_