IMF Sees Ukrainian Politicians Curbing Anti-Corruption Efforts

  • Risks to outlook include political instability, early election
  • Goverment urged to proceed with pension reform, privatizations

Ukrainian anti-corruption efforts are falling short because of political opposition to clean up years of post-Soviet misdeeds, the International Monetary Fund said.

The Washington-based lender urged the eastern European nation to show progress in fighting graft and pushing through other reforms, including sales of state assets and a revamp of the pension system, to keep cash from its $17.5 billion bailout loan flowing. Managing Director Christine Lagarde has warned in the past that financing could be cut off if sufficient headway isn’t made.

“Tackling corruption and reducing the influence of vested interests on policy making remain key challenges,” the IMF said Monday in a report after reviewing Ukrainian government policies. “Progress in tackling corruption, privatizing state-owned enterprises and advancing pension reform has been slower than envisaged against significant political resistance.”

Ukraine, still rebuilding its economy after its second revolution in a decade, received $1 billion from the IMF last month, with the disbursement delayed for a year because of a budget dispute, the resignation of the prime minister and foot dragging over reforms. While the government repeatedly affirms its commitment to eradicate graft, the nation ranks 130th in Transparency International’s Corruption Perceptions Index, showing little improvement since protesters ouster Russian-backed President Viktor Yanukovych in 2014.

Risk Factors

The IMF said the anti-corruption bureau set up last year at the fund’s request must by December be able to use investigative techniques including undercover operations and communications intercepts without having to rely on other agencies’ infrastructure. Top officials must file asset and income declarations using a newly created electronic system by the end of October.

Gross domestic product is set to grow 1.5 percent this year after slumping more than 15 percent in the last two years, and the government should be able to regain access to international bond markets in late 2017 following a restructuring, according to the IMF. Even so, it said risks remain “large,” with the main one being political instability, including possible early elections, policy reversals and slow program implementation.

The government has a “slim and fragile” majority in parliament, the IMF said. “Impatience with the speed at which living standards improve and corruption is addressed could cause the public to lose confidence in the authorities’ reform program.”

The fund also advocated the sale of state assets such as ammonia maker Odeskyi Portside Plant, which is scheduled to be auctioned by the end of October, and land sales, which can release “significant growth potential.” The Economy Ministry is dividing state-run companies into three categories -- those for sale, those for liquidation and those to be kept under state management.

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