## IMF Staff Concludes Mission to Ukraine

_IMF News, September 27, 2019_

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## Bibliographic details
- Published: September 27, 2019

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### Mission details
- Press Release No. 19/356
- Mission led by Ron van Rooden visited Kyiv during September 12-26 for the 2019 Article IV consultation and to initiate discussions on a potential IMF Extended Fund Facility (EFF) program.
- Statement date: September 27, 2019

### Economic assessment and recent achievements
- Ukraine has restored macro-economic stability following the 2014–15 crisis and growth has resumed.
- Current growth pace: 2½–3½ percent.
- Overall fiscal deficit: limited to just above 2 percent of GDP in the last two years and expected to remain at the same level this year.
- Energy sector quasi-fiscal deficit: eliminated.
- Current account deficit: 3–3½ percent of GDP.
- International reserves: recovered to over US$20 billion.
- Banking sector: decisive efforts to restructure the banking system have been critical for stabilization and the resumption of growth.

### Constraints to faster, inclusive growth
- Per capita GDP (in PPP terms) in Ukraine: just 20 percent of the EU average, the second lowest level of all Central and Eastern European countries.
- Labor productivity: amounts to less than 10 percent of average productivity in EU countries.
- Key structural impediments:
  - Weak business environment with shortcomings in the legal framework.
  - Pervasive corruption; progress in institution-building to fight corruption has not yet yielded tangible results.
  - Large parts of the economy dominated by inefficient state-owned enterprises or by oligarchs, deterring competition and investment.
- Investment, notably foreign direct investment, has been much lower than in regional peers, limiting productivity growth, private sector job creation, and improvements in living standards.
- Resulting labor migration: many workers seek job opportunities abroad.

### Policy priorities and recommendations
- Maintain macro-economic stability as a prerequisite for faster growth.
  - Prudent fiscal policies to ensure debt sustainability.
  - Improve spending efficiency and outcomes—including in health care and education.
  - Support vulnerable households through a well-targeted social safety net.
  - Cautious monetary policy to further reduce inflation and build reserves within a flexible exchange rate regime.
  - Safeguard financial stability while strengthening financial intermediation and minimizing fiscal costs from bank resolutions.
  - Ensure central bank independence.
- Accelerate structural reforms to lift growth:
  - Firmly establish the rule of law, including through judicial reform.
  - Decisively tackle corruption.
  - Enhance competition and open up markets, particularly in the energy and agricultural sectors.
  - Reduce the role of the state and oligarchs in the economy.
  - Ensure wage growth is consistent with improvements in labor productivity to safeguard competitiveness.
  - With sustained reform implementation, further integrate with the European economy and supply chains and take greater advantage of the Deep and Comprehensive Free Trade Agreement with the EU.

### IMF program discussions
- Authorities have requested a new IMF-supported program to anchor policies and help cover financing needs in the coming years.
- Mission started discussions on a new 3-year arrangement that could be supported under the IMF’s Extended Fund Facility.
- Productive discussions occurred on fiscal and monetary policies and key reform measures; importance underscored of central bank independence, safeguarding financial stability, and minimizing fiscal costs of bank resolutions.
- Discussions on the new program will continue in the coming weeks.

*Source: IMF Staff Concludes Mission to Ukraine (Press Release No. 19/356), September 27, 2019.*

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## References

- [Ukraine and the IMF](http://www.imf.org/external/country/UKR/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/09/26/pr19356-ukraine-imf-staff-concludes-mission_