An International Monetary Fund mission has praised the Ukrainian authorities` progress but says Ukraine still needs more time to ensure medium-term fiscal sustainability.
”The mission held constructive discussions with the authorities on policies needed to complete the third review under the EFF arrangement. While good progress has been made, the authorities need some 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,” IMF experts said in a statement at the conclusion of the IMF mission after their work in Kyiv on November 18.
Discussions on these policies will continue in the period ahead, they said.
Yet, the experts stress the views expressed in the statement 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, they added.
”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,” the IMF mission concluded.
According to the IMF experts, turning the current stabilization into strong and sustainable growth—so that Ukraine can catch up with its regional peers—will not be an easy task. This has been a challenge in the past, when 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 Anti-Corruption 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,” IMF mission head by Ron van Rooden said.