It’s been a bad week for reform in Ukraine. Judicial reform and anti-corruption agenda at threat with High Council of Justice and Specialized Anti-Prosecutor’s Office reforms on edge after Supreme Court rulings and suggestive of a backlash from the corrupt system — The Empire Strikes Back.
And then we have had another state-owned enterprise in the news for all the wrong reasons suggesting that good corporate governance in Ukrainian SOEs is effectively dead. It all feels a bit like we are reaching a critical juncture for reform in Ukraine. Another critical juncture.
President Volodymyr Zelensky will no doubt focus on his de-oligarchization drive and more therein Friday with claims of a traitor against Vladimir Putin’s buddy Viktor Medvedchuk. I doubt many Ukrainians would have a problem with that but in trying to link former National Bank of Ukraine governor, Valeria Gontareva, and an actual proven reformer, with Medvedchuk, this all leaves a deeply troubling impression for anyone who knows the main players and actually the remarkable reforms achieved at the NBU and in the banking sector under Gontareva.
It’s easy to criticize Gontareva and her team for the reforms undertaken in the crazy days of 2015-17 when the country was at war and the economy collapsing. Corners likely were cut. But they reformed the banks/NBU and stabilized the macroeconomic situation. Ukraine is currently being hailed for its stable macroeconomic performance – stable and strong currency, high foreign-exchange reserve buffers, and a manageable position. But little of this is due to the current Zelensky team – it’s due to Gontareva and her team – and much of the new management at the NBU and broader economic policy team are currently enjoying the fruits of that. Gontareva and her team did some brave but mission-critical things. It’s disappointing that Zelensky’s team feels the need to besmirch her legacy with the Medvedchuk link.
Anyway, let’s see what Zelensky does – a key last test if he actually is a reformer. Obviously, the European Union still has hope – releasing the latest tranche last month I guess on a promise. I guess the International Monetary Fund is in a similar position as it looks to complete the latest loan review mission. It started the review on the promise that things on the remaining to-do list would be done in time for any IMF board meeting. Let’s see where we are on the NBU and National Anti-Corruption Bureau of Ukraine laws and whether the IMF actually cares about corporate governance at state-owned enterprises. That said the IMF might be in no position to lecture anyone about corporate governance if it does not get its house in order soon over the World Bank Doing Business rankings scandal. Don’t hold your breath there as I sense there are some very big carpets in D.C. ripe for sweeping any embarrassment under.
IMF managing director Kristalina Georgieva has been pretty “hands-on” with respect to the Ukraine program, intervening at different times to keep it alive, prod it forward. Enough said there.
Unfortunately, Zelensky’s de-oligarchization legislation feels more like window dressing for the domestic audience while more substantive and important judicial and anti-corruption, governance reforms are hanging by a thread.
