Jaresko Says Reform Retreat Is Top Economic Risk Facing Ukraine

  • State fighting corruption with administrative, police reforms
  • EBRD gas-purchase loan will increase energy independence

Ukrainian Finance Minister Natalie Jaresko said the greatest risks to putting the country back on a path to growth are political developments that dial back reforms of its war-shattered economy.

“Everyone understands the need to reform when they are facing a financial crisis,” Jaresko said in an interview in the Peruvian capital of Lima during the International Monetary Fund’s annual meeting. “But with comfort of success, there comes the ability to become populist. Populism is the No. 1 risk.”

Ukraine’s 18-month economic slump eased in the second quarter, as the conflict in the east of the country abated. Still, the country suffers from the world’s second-fastest inflation, at almost 52 percent in September, a weakened currency and reconstruction challenges ranging from destroyed infrastructure to entrenched corruption. Jaresko said the government targets 2 percent economic growth in 2016.

Ukraine is aiming to complete an $18 billion debt-restructuring agreement by the start of December, less than three weeks before full payment is due to Russia on a $3 billion bond that’s under dispute.

“It’s one of the most complicated and demanding financial crises,” Jaresko said. “In a few weeks time we have local elections. We don’t have the type of consolidation in the political arena that would make it easier.”

Jaresko said the government is fighting corruption by reforming tax administration, placing state expenditures online, restructuring the national police service and other measures.

“You can’t do anything without the structural changes of deregulation, anti-corruption, which is practically one and the same,” she said. “Deregulation is anti-corruption. For us to succeed we need to move along that path very rapidly.”

A $300-million loan from the European Bank for Reconstruction and Development agreed in September will put Ukraine in a more sustainable energy-supply situation, the minister said.

“If these facilities function the way they are planned to, for several years in a row we will have ongoing available capital to purchase gas on a timely basis,” she said. It will “put us in the situation where we are not every single year looking for a last-ditch effort to buy gas.”

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