Ukraine has missed two deadlines of the IMF program. What's next

Last week Ukraine in fact managed to fulfill another two of structural benchmarks of the Memorandum with the IMF. However, the government will miss deadlines of at least two others structural benchmarks. In addition, Ukraine fulfils the first recommendation of the European Commission on the EU membership.

First of all, 27 July the Parliament adopted the DL #9346-1 to reinstate the articles of the Budget Code that allow preparation of the medium-term budget framework, elaboration of the debt strategy, and ringfencing risks from guarantees. According to the new provisions, amendments to the state budget law can be considered only when the Ministry of Finance supports them. The DL also restores the development of the State Debt Management Strategy in 2023 and preparation of the medium-term budget framework from the 01 January 2024 and. Moreover, state guarantees provided by the decisions of the CMU are limited to the 3% of the planned general budget revenues; the limit for the state guarantees based on international financial support will be determined by the state budget law. The DL is currently waiting for the President to sign. 

By the way, last week there was one more decision, which isn’t connected to the EFF program, but shows that Ukraine is determined to maintain budgetary discipline. The president vetoed a bill on financing the completion of the Holodomor Museum. The relevant DL suggests to provide UAH 573,9 mln for financing the construction of the Holodomor Museum. 

Secondly, the President signed the DL #8401 on tax policy and administration prepared under the PMB. It means that Ukraine managed to fulfill the deadline of the structural benchmark adoption which was reset from end-June 2023 to end-July 2023. The DL comes into force since 01 August 2023. 

And this is where the responsible fulfillment of obligations ends for now. On another two last week decisions under the requirements of the Memorandum with the IMF, the deadlines have already been missed. 

To begin with, the Verkhovna Rada adopted in the second reading the DL #9311-1-d on the corporate governance reform at the GTSO. The DL meets all the requirements under the Memorandum with the IMF and was agreed with the Energy Community Secretariat. All harmful amendments submitted for the second reading were declined. 

However, the Parliament still prepares it for signing, so technically Ukraine didn’t meet the deadlines set in the Memorandum for transferring the GTSO shareholding directly to the Ministry of Energy and adopting the new charter till the end-July. 

Regarding the corporate governance reform of the GTSO, the CMU adopted amendments to the resolution #643 which ensure that members of the GTSO Supervisory Board will be elected through a transparent competition involving professional recruiters. It’s a necessary step, not the structural benchmark though.

Second missed deadline goes to the restoring asset declarations for public officials was adopted in the first reading. The Parliament supported the DL #9534 on this issue with 299 votes. The main provision of the DL is that public officials should submit asset declarations not only for the current year but also for the previous ones when the e-declaration was paused. Moreover, the DL suggest a number of benefits for military servicemen. Moreover, the DL proposes to restore special inspections by NACP and public access to declarations without certain personal data. However, we can already state that Ukraine missed the deadline of the Structural Benchmark on enacting the law to restore asset declaration of public officials set on end-July. 

Moreover, the reform of the Anti-Monopoly Committee didn’t have enough votes. The Parliament postponed consideration of the draft law which strengthens the legal framework of the AMCU #5431 formally due to the air alert. It’s not a structural benchmark, but this step is mentioned in the Memorandum among other obligations took by the government. 

Meanwhile the work on Ukraine’s EU membership is going. The Parliament adopted the DL on selection of judges for Constitutional Court which strengthens the role of international experts in the selection of judges. The DL fulfils the first recommendation of the European Commission on Ukraine's EU membership. 

With the DL for launching The State Register of Sanctions signed by the President last week and the first cut of the key policy rate from 25% to 22% since June 2022, Ukraine manages to maintain the image of reliable and promising partner for its international partners. As for the IMF requirements, there is still a lot of hope that Ukraine can manage to fulfill all needed structural benchmarks by the time the next review of the IMF program begins in the end of September – first half of October. But still, we’ve already missed two deadlines and it’s already a sign to be concerned.

Iaroslav Zhelezniak, co-Chair of the Ukrainian Chapter of the Parliamentary Network of the World Bank and IMF, First Deputy Head of the Parliamentary Committee on Finance, Tax and Customs Policy