Prime Minister Arseniy Yatsenyuk gave his assessment to parliament of his government a year after its formation, and hence it is now possible to be voted down via a no-confidence motion.
Not yet clear when/if this will happen, albeit I hear that ex-Prime Minister and current member of parlaiment Yulia Tymoshenko has collected 70-odd signatures to lodge such a motion.
Tymoshenko is calling for early elections in March, which I cannot see changing that much unless that is there is a change in the electoral law.
The Rada still seems to be dominated by big business interests (because of the part constituency based system), resisting still meaningful changes on the rule of law front.
It seems that Yatsenyuk will survive this time around, as Biden seems to have banged the line that the last thing that Ukraine needs is another election, but rather everyone needs to focus on pushing through difficult reforms still.
Yatsenyuk commended the new tax code/budget for 2016 – more or less agreed at the meeting of the National Reform Council earlier this week, and which presumably will keep the deficit in a ballpark close to the earlier 3.7 percent deficit target agreed with the International Monetary Fund.
Apparently the cabinet agreed on the new drafts, and the aim is likely to be to present these for a vote in the Verkhovna Rada next week, or at least before year-end.
That could all depend on the timing of a likely no-confidence motion in the Yatseniuk government – not quite clear there when/if that will be.
Presumably a vote against Yatsenyuk will also throw budget and tax plans into disarray and send the IMF program off course – no reason then for the Russians to complain about the IMF change in its lending into official arrears policy, as the Ukrainians will have shot themselves in the feet.
In defending his cause, Yatseniuk highlighted his expectation that the economy will post real GDP growth in 2016, of around 2 percent – actually I think we could see a much stronger rebound than this, depending on peace/stability still in the east, and no domestic political machinations (e.g. collapse of coalition and early elections), due to the very low base, so a 3-4 percent out-turn would not surprise me, and driven by a combination of very low base (real GDP down 20 percent), and cheap REER (down 15-20 percent still), cheap/skilled labour, plus enduring strength of some key sectors such ass IT and agriculture.
But the problem for me is that growth could easily then drop back in 2017+ without real progress on issues related to rule of law which will be key in driving investment (domestic and foreign).
If Yatseniuk survives, and the budget/tax code is passed, we could see a window of good news stories for Ukraine, with IMF/EU/US cash disbursed, EU sanctions on Russia rolled, the Deep and Comprehensive Free Trade Act implemented from Jan. 1, and the green shoots of economic growth driven by macro stabilisation begin to play out.
The question then though is what Russia does next, and especially if its Syrian “twist” fails to break ranks in the EU and with the US over sanctions. It will have to decide whether it sticks of indeed then twists in Ukraine again.
