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 issues were in focus June 19-25.
Introduction
On June 24, Parliament speaker Volodymyr Groysman urged lawmakersto extend the spring parliamentary session and to cancel a July 17 –Sept. 1 summer break. “There is no time for holiday,” Groysman said amid the recent slow pace of reform and referring to vital issues on the agenda. Among them are changes to the Constitution.
Economy & finance
On June 22, amid negotiations with foreign private lenders, Ukraine made a timely payment on a $75 million interest coupon on a controversial $3 billion debt to Russia.This debt was taken on by ex-President Viktor Yanukovych in the last weeks of his regime, and the obligation technically has eurobond status in order to be included in the debt-restructuring negotiations. However, the International Monetary Fund has excluded the debt from the talks, Bloomberg reported.
Supported by the international lender, Ukraine requested that commercial creditors accept a reduction in the principals of a total of $19 billion worth of bonds. The “haircut” included in the plan was widely believed to amount to 40 percent. Maturity extensions and coupon reductions were also discussed.
“With this, Ukraine cuts its debt burden to acceptable levels,” Finance Minister Natalie Jaresko said, adding that the plan was a limited-time offer, and otherwise threatened default. But private creditors insisted that Ukraine was capable of paying in full. This was rejected by Jaresko as it would require digging into the country’s foreign reserves, only recently replenished by loans from the International Monetary Fund.
The next tri-party meeting with the IMF and private creditors will take place on June 30. The talks are part of an effort to achieve savings of $15.3 billion in payments on external bonds over four years and cut the debt to 71 percent of gross domestic product by 2020.
At $126 billion by the first quarter of 2015, Ukraine’s external debt reached 111 percent of the country’s shrinking GDP, surpassing 100 percent for the first time, the central bank reported on June 22.
On June 18, Parliament approved legislation aimed at enhancing the central bank’s soundness and strengthening its independence. It is also a key structural benchmark in Ukraine’s negotiations with the IMF.
The central bank’s board members now share equal powers, including the governor. Procedures for appointing and dismissing deputy governors have also been streamlined. Current judicial powers to suspend the bank’s decisions or order the bank to perform certain actions will be nullified.
On June 19, Christine Lagarde, managing director of the IMF welcomed legislative progress being made in Ukraine and said that she “strongly believe(s) that the authorities’ program and the determination and boldness with which it is being implemented, despite considerable headwinds, warrant the support of the international community.”
Rule of law
Proposed changes to the Constitution are expected to strip the Prosecutor General’s Office of its much criticized “general oversight” powers that allow it to have oversight and control over all other public institutions. Widely acknowledged as strongly contributing to the country’s corruption problems, the powers have been widely misused, even to nullify commercial contracts.
On June 19,the Venice Commission approved the Ukrainian lustration law aimed at ridding the government of Yanukovych-era officials. Its opinion states that the law is consistent with international and European standards. However, it recommended drawing a clear distinction between actual lustration and political games played between individuals running for elected office.
Security & defense
Hryhoriy Ostafiychuk, the former deputy prosecutor of Kyiv, became the Security Service’s chief investigator on June 23. Oleksandra Drik, head of the Public Lustration Committee cticized the appointment, calling it sabotage. By appointing Ostafiychuk and accessing information about surveillance results, the president has violated the lustration laws, she said.
On June 18, Parliament fired Valentyn Nalyvaychenko as head of the State Security Service. In his place, Ukrainian President Petro Poroshenko appointed Vasyl Hrytsak, former head of the service’s Anti-Terrorist Center.
Yuriy Lutsenko, leader of the pro-presidential camp in Parliament, commented: “The president believes that in the current situation, the security services should be headed not by a politician, but by an intelligence officer.”
Public administration
Aiming at delegating more authority to local governments, government initiated a process of decentralization to be followed with changes to the Constitution.
“We are already providing (increased financial) resources to local communities,” Deputy Prime Minister Hennadiy Zubko said on June 25. The reform is primarily providing additional powers and funding to elected bodies, rather than to the presidential-appointed heads of regions and oblasts. The Venice Commission had approved the proposed changes after a preliminary assessment, saying that they were “largely compatible with the European Charter of Local Self-Government.”
“We have to go from an oligarch-type of economy to a European model, where small and medium businesses play a large role,” said Volodymyr Groysman, speaker of Parliament. “We will never achieve that without decentralization.”
On June 25, Aivaras Abromavicius, Ukraine’s economic development and trade minister announced that Ukraine will set up trade agencies in the U.S., the EU (Brussels), Germany, France, China and the Middle East by the end of 2016.
On June 25, the Cabinet of Ministers extended a moratorium on audits of small-and middle-sized entities until the end of 2016. The moratorium was announced at the end of 2014 and was to lapse on July 1. But after consultations with businesses, the ministry decided to prolong it.
In a quest to optimize the operation of the tax administration, the government has subordinated it under the Ministry of Finance. The State Fiscal Service and customs service were also in need of “total changes from top to bottom,” Prime Minister Arseniy Yatsenyuk said. On June 23, Jaresko launched anti-corruption reforms for the State Fiscal Service, which include a reduction in staff, the standardization of information technology systems, the introduction of cross checking within the organization and external audits.
