Editor's Note: The Kyiv Post tracks the progress made by Ukraine's post-EuroMaidan Revolution leaders in making structural changes in the public interest in six key areas: economy & finance, security & defense, energy, rule of law, public administration and land. The following measures were passed on June 9-18. Parliament is scheduled to work through July 17 before going on a 45-day summer break.
Economy & finance
Amid ongoing negotiations with private international creditors, Prime Minister Arseniy Yatsenyuk has warned that Ukraine will not be able to fully service its foreign debt and that bondholders would have to accept a cut in the principal. The alternative, Yatsenyuk said, was default. As of June 18, the government had the legal backing to default on the commercial part of the country’s foreign debt.
Finance Minister Natalie Jaresko is locked in tough talks to seek more than $15 billion in savings on debt repayment over the next four years.
Servicing debt currently consumes 5 percent of the country’s shrinking gross domestic product, which may sink to $100 billion this year. Ukraine also spends 5 percent of its GDP on defense. The prime minister said repaying the $40 billion in debt accumulated during President Viktor Yanukovych’s regime (2010-2014) was “incompatible with the economic and fiscal situation in the country.”
Meanwhile, commercial international lenders, including such financial heavyweights as Franklin Templeton, continue to push for repayment despite Ukraine’s low foreign currency reserves that led to a sharp decline in the hryvnia in February.
President Petro Poroshenko called Russia’s $3 billion Eurobond loan to Ukraine under Yanukovych “a bribe, provided to keep Ukraine in Russia’s orbit” and away from European integration, according to his interview with Bloomberg on June 15.
Christine Lagarde, head of the International Monetary Fund, said on June 12 that the IMF would continue to lend to Ukraine, even if the country defaulted on its debt obligations.
Rule of law
After 14 months of delays, the High Council of Justice, the body that hires, fires and disciplines judges, resumed work on June 9. The judicial body has historically been used by presidents to control the judiciary. The appointment of the new chairman, Ihor Benedysyuk, a judge in the Supreme Commercial Court and a Poroshenko ally, has raised concern. Lawmaker Serhiy Vlasenko, who famously defended former Prime Minister Yulia Tymoshenko in 2011 in a criminal case that was largely seen as politically motivated, said that the selection of Benedysyuk was a sign that the president would try to continue to influence the courts.
Security & defense
The next call up and recruitment of conscripts into the army will begin on June 19 and continue through Aug. 17, according to military spokesperson, Vladyslav Seleznyov. On June 17, eight members of the Interior Ministry’s Tornado Battalion, including its commander Ruslan Onyshchenko, were arrested on suspicion of committing rape and torture, according to Deputy Prosecutor General Anatoly Matios. They denied the charges and said their arrest was tied to smuggling of iron ore in which their superior, Luhansk Oblast Police Chief Anatoly Naumenko, is involved.
Public administration
During a meeting with businesses on June 16, Roman Nasirov, the new head of Ukraine’s State Fiscal Service, announced upcoming reforms approved by the IMF. They include changing the taxation system and structural changes within the fiscal service and customs. “The tax law amendments adopted in December were not a real tax reform,” he said. “They were limited to timely and sporadic changes.” The number of tax audits is now expected to shrink by 30-40 percent. An “electronic cabinet” was launched for taxpayers to manage taxes online.
On May 16, Parliament moved to limit the scope of power of the monopolistic, Soviet-era state organization, the Public Housing and Utilities Service (ZhEK). A new law gives apartment-owner groups and community associations the right to act as legal entities, replacing the state-run service provider, should they choose. Such associations can now hire subcontractors and set up heating meters and other energy-saving resources.
Energy
On June 5, Yatsenyuk said that the management of majority state-owned Ukrnafta can’t be changed because of a contract signed between Naftogaz and Ukrnafta. He asked that Yulia Tymoshenko’s faction, which was responsible for authorizing the contract in 2009, find a way out of the deal. “Under the contract, a change of management by the state is impossible,” he said. “In case Ukraine violates this provision, it will be exposed to London arbitration and fines… which can reach $5 billion.”
Pro-presidential lawmaker Serhiy Leshchenko said the contract gives billionaire Igor Kolomoisky the lifelong right to appoint the head of Ukrnafta, despite the state’s 50-percent-plus-one share ownership. Tymoshenko responded that the fourth-quarter gas price for Ukraine will be below $150 per 1,000 cubic meters of gas. She also said that Ukraine had benefited from the contract.
