Two historic votes for Ukraine
Ukrainian MPs voted on bills on changes to banking system and on opening country’s land market.
Ukrainian presidential spokesperson Iuliia Mendel wrote in an article published on the Atlantic Council's website that this week began with an historic session of the Ukrainian parliament. MPs voted on two hugely necessary bills: one on changes to the banking system, and another opening the country’s land market. While this might sound like the introduction to an op-ed on boring bureaucratic themes, in reality these two pieces of legislation are major breakthroughs that could potentially change the life of every Ukrainian.
Ukraine is an agricultural powerhouse that has long since earned a proud reputation as Europe’s “breadbasket”. Two-thirds of Ukraine’s vast territory, the largest in Europe, is made up of rich agricultural lands. The agricultural sector is the foundation of the national economy and represents 40% of Ukraine’s GDP. However, Ukraine is one of only six countries on the planet that still don’t have open land markets. Instead, agricultural land is one of the many large shadow sectors of our economy that keep millions of Ukrainians in poverty.
The opening of the agricultural land market in Ukraine is an extremely sensitive issue. It has been opposed by the political opposition, by many oligarchs, and even by some ordinary people who have been intimidated by political myths for nearly thirty years. Initially, the government of President Volodymyr Zelenskyy, who was elected only a year ago, committed itself to liberalizing the land market as much as possible. However, in order to have this bill considered in parliament this week, the government needed to make major compromises.
Accordingly, we banned the purchase of land by foreigners until the Ukrainian people decide otherwise in a referendum; we reduced the amount of land that can be bought by individuals from 200,000 hectares to only 100 hectares; we banned the purchase of public land and delayed reform implementation until July 2021. It was vital to overcome three key fears: of foreigners, of oligarchs, and of small corporate “raiders” who, in people’s nightmares, could steal away their “sacred land”.
We understood that if there were no votes for this bill, the chances of proceeding with land reform at all would be almost nonexistent. By approving this bill, Ukraine took the first and most important step towards creating a land market by lifting its “eternal” moratorium on the sale of agricultural land.
It is now time to move forward. President Zelensky and the government want the land market liberalization process to have a significant impact and bring major benefits to the people of Ukraine. The best evidence of this commitment is the preservation of full state financing for the agricultural sector at a time when the state budget is experiencing severe cuts due to the coronavirus pandemic and approaching economic crisis.
Ukraine is planning to create complementary legislation to make the land market function efficiently. This includes legislation that will enable farmers to take out loans in order to expand their business. Stronger safeguards will be introduced to protect the agricultural industry, and additional legislation will create a framework for a future referendum asking Ukrainians whether to allow the sale of farmland to foreigners.
The second key vote was on changes to the Ukrainian banking system. This bill was widely dubbed the “Anti-Kolomoisky Law” after Ihor Kolomoisky, one of the richest people in Ukraine. Kolomoiskiy is a well-known figure with interests in a range of different economic sectors and was the co-founder of Privatbank, the largest bank in Ukraine. Almost half the country are clients of this bank. It was nationalized in 2016 by the previous government due to large financial gaps. The National Bank did everything to resuscitate Privatbank and make it function as a reliable element of the country’s financial system.
The banking sector bill introduces strong safeguards into Ukrainian legislation that will prevent the bank from being returned to its previous owners. This bill will apply equally to any similar future situation. It was voted through in the first reading on March 30. By Ukrainian law, one more reading will need to take place, but this is already a huge step forward. It offers the Ukrainian people genuine protection against the rule of oligarchs.
These two laws open the way for Ukraine to secure financial support from the IMF, the World Bank, and other international partners as the country struggles with the spread of the coronavirus pandemic and the approaching economic crisis. The IMF has increased the volume of potential support on offer from USD 5.5 billion to almost USD 8 billion. Together with support from other international financial institutions, these laws potentially unlock USD 10 billion in financing for Ukraine.
This could be decisive in allowing Ukraine to avoid a default, which might otherwise happen due to the country’s large external debt obligations and the global challenges facing Ukraine’s commodities-based economy. In the event of a default, President Zelensky understands that Ukraine will have a very long and difficult road to recovery. The government will not risk the lives of Ukrainians and therefore does not consider default as an option.
These two historical bills are important for the Ukrainian people, who deserve economic stability together with an open, transparent and fair land market and a reliable banking system. They are also a good example of how the IMF, the World Bank, and Ukraine’s other international partners demonstrate their commitment to working with us to achieve shared prosperity for every Ukrainian.
Iuliia Mendel is the Spokesperson for President of Ukraine Volodymyr Zelensky.
Government transfers 435 state-owned objects for privatization
The Cabinet of Ministers has approved a decision to transfer 435 state-owned objects for privatization, including four large enterprises, according to the Government portal.
"The government has transferred a record 431 state-owned objects for privatization to the State Property Fund for further privatization. In total, the government has already transferred 961 objects over the past six months, which is ten times higher than in 10 years before," reads the statement. Prime Minister Oleksiy Honcharuk stated that from 2008 to 2018, only 93 objects were transferred for privatization: "The enterprises, which generated problems and losses for years, will get new efficient owners, new jobs".
In addition, the government transferred for large-scale privatization four large state-owned companies: the Bilshovyk plant (JSC First Kyiv Machine-building Plant), JSC State Food and Grain Corporation, SJSC Khlib of Ukraine, and SE Artemsil of Ukraine. Enterprises will be restructured and prepared for transparent auctions with the involvement of a private investor.
Ukraine's international reserves grow to $26.6 bln
Ukraine's international reserves grew by $0.3 billion in February 2020, to $26.6 billion, the press service of the National Bank of Ukraine (NBU) has reported.
"As of March 1, 2020, Ukraine's international reserves, according to tentative data, amounted to $26.623 billion (in equivalent). In February, they increased by 1.3%. An increase in international reserves in February was caused, first and foremost, by the continued favorable situation in the foreign exchange market," the report reads.
In general, the dynamics of the reserves during the month were determined by the following factors: first, the NBU's transactions on the interbank foreign exchange market. In February, the net supply of foreign currency increased as a result of maintaining a sufficient level of export earnings and a simultaneous decrease in demand for foreign currency from importers due to lower prices and energy demand amid a warm winter, as well as the spread of the coronavirus around the world, which hindered world trade and restrained international tourism. As a result, NBU currency purchases on the interbank foreign exchange market exceeded sales by $689 million. The NBU replenished international reserves on separate days when the supply of foreign currency was higher than demand, and in total, it bought $734 million. The current volume of international reserves covers four months of future imports, which is sufficient to meet Ukraine's commitments and ongoing operations by the government and the National Bank of Ukraine. Ukraine's international reserves amounted to $26.293 billion as of February 1, 2020.
Kuleba: wants to open Southeast Asia to Ukraine
Southeast Asia has significant economic and political opportunities for Ukraine.
"We should focus on ensuring that the Ukrainian embassies abroad work as efficiently as possible to attract investment and promote trade in Ukrainian goods, especially the industrial ones. The second novelty I hope to be remembered for as a minister is that I want to open Southeast Asia to Ukraine," Foreign Minister of Ukraine Dmytro Kuleba said on the air of the Inter TV channel, an Ukrinform correspondent reported.
According to him, the economic and political opportunities for Ukraine are concentrated in this region. "I want to pay a lot of attention to this area. Of course, Ukraine will move towards EU and NATO membership as this path was chosen by the people. But it would be a huge mistake for Ukraine to focus on the EU-NATO-USA-Russia quadrangle. The world is much bigger," the minister noted.
Ukraine increases grain exports by quarter in current MY
Ukraine exported 42.32 million tonnes of grain crops and legumes since the beginning of the 2019/2020 marketing year (MY), which is 24.5% higher than over the relevant period in the previous MY. The information and analytical portal of the agro-industrial complex of Ukraine reported this with a reference to the State Fiscal Service. In the period from July 1, 2019 to March 11, 2020, Ukraine exported 42.32 million tonnes of grain crops and legumes, which is 24.5% higher year-on-year. In particular, Ukraine exported 16.83 million tonnes of wheat (up 31.7%), 4.07 million tonnes of barley (up 23.8% more), and 21 million tonnes of corn (up 20.9%). Ukraine’s exports of flour over the reporting period grew by 42.4%, to 261.6 thousand tonnes.
National Bank reduces discount rate to 10%
The National Bank of Ukraine (NBU) has decided to lower the discount rate to 10% from March 13, 2020, NBU Governor Yakiv Smolii states.
“The Board of the National Bank of Ukraine decided to reduce the discount rate to 10% per annum from March 13, 2020,” Smolii said at a press conference on Thursday, March 12, according to an Ukrinform correspondent. As Ukrinform reported earlier, the NBU Board decided to reduce the discount rate to 11% from January 31, 2020, 13.5% from December 13, 2019, and 15.5% from October 25, 2019. On September 6, 2019, the discount rate was reduced to 16.5%, and in July it was lowered to 17%.
Ukraine’s GDP grows by 3.2% in 2019 – State Statistics Service
Ukraine’s real GDP in 2019 rose by 3.2% from 2018, according to the data provided by the State Statistics Service. "The real gross domestic product (GDP) grew by 3.2% in 2019 compared to 2018," reads the report. In 2019, the nominal GDP amounted to UAH 3.97 trillion, the GDP per capita made up UAH 94.57 thousand. As Ukrinform reported, in early February 2020, the Ministry of Economic Development, Trade and Agriculture stated that Ukraine’s economic activity remained at a sufficiently high level - GDP growth was estimated at 3.3%, which is almost the same as in 2018.
PM Shmyhal: Emergency situation not to derail economy
The emergency situation regime, which was introduced in Ukraine until April 24, does not violate the constitutional rights of the population and does not derail the economy.
"The emergency situation is not a state of emergency. It neither violates constitutional rights nor derails the economy. First of all, it implies strengthening our joint responsibilities to fight the epidemic," Prime Minister of Ukraine Denys Shmyhal said in his video address posted on Telegram. He added that the unified state civil protection system has been put on full alert and the exchange of information between regions, hospitals, people involved in the fight against coronavirus has speeded up. "We will be able to act faster, bureaucratic issues will not be an obstacle to the provision of healthcare services to Ukrainians," the Prime Minister said. Since March 12, the quarantine in educational establishments and a number of other measures to combat the spread of coronavirus have been introduced in Ukraine. On March 25, the Government of Ukraine introduced the emergency situation regime in the entire territory of the country and extended lockdown measures until April 24. As of 10:00 on March 26, Ukraine had 156 laboratory-confirmed cases of COVID-19, including five deaths.
Zelensky: Ukraine agrees with IMF on potential increase in assistance
Ukraine has agreed with the IMF on a potential increase in financial assistance up to $8 billion. "We hold talks with the IMF every day. We have agreed to increase assistance. I talk daily with the IMF, the World Bank, the EBRD and some countries' leaders. At present, we can get an increase in the IMF program of up to $8 billion at least. If we get assistance of the World Bank and the EBRD, we can at least get $10 billion," President of Ukraine Volodymyr Zelensky said after the Servant of the People party faction meeting on Friday evening, an Ukrinform correspondent reported. According to him, the current IMF conditions are the adoption of the laws on banks and the land market. "The Parliament will convene on Monday. We have to go through all these issues as much as we can. No one wants default in the country. I am sure that MPs will hear me and this will not happen, and there will be support from international institutions, including the IMF. If we fulfill these conditions, we will receive the first quick tranche of $1.75-2 billion immediately in the budget of Ukraine in the next 15 days," Zelensky said. At the same time, he did not specify on how the Verkhovna Rada would consider the land market bill: whether it would consider the rest of amendments or not. "My initiative and the initiative of the Servant of the People party faction is the following: we have already agreed that we will not sell state land now; we have reduced the concentration for individuals to 100 hectares, and for legal entities – this will be the second stage from 2024 – to 10,000 hectares," the President noted.
Coronavirus pandemic can help Ukraine boost agricultural exports - trade representative
The coronavirus pandemic has a negative impact on industrial production, but the demand for food products is growing so Ukraine has good potential to increase exports of agricultural products. Ukraine's Trade Representative, Deputy Minister for Economic Development, Trade and Agriculture of Ukraine Taras Kachka said this in an interview with ZN.UA. "You see that the pandemic coincided with a slump in oil prices, a significant fall in stock market indices, so, accordingly, they started talking about a recession. And we also see two trends here. One of them is negative, and this applies more to the industry, metallurgy, where we see that the potential slowdown in or discontinuation of the work of consumers of our products (such as automotive plants, construction) in Europe and the U.S. gives us a reason to make a negative forecast for our industrial products. The situation in the agricultural sector is the opposite. We have a vision that demand for Ukrainian agricultural products will grow in the world because there is an issue of food security. And here we have really good indicators: prices are more or less balanced and are going up, demand is permanent, so we have a good forecast for this product category," Kachka said. He noted that today it is impossible to generalize and say that all is bad or all is well. "If we talk about the first two months of the year, imports have fallen slightly and exports have increased slightly," Kachka said. "Therefore, in January-February, our negative trade balance declined by almost half in terms of trade in goods. So the indicators are good. But March will be truly indicative. Now we see that there is good news on many goods, there is less negative news. But we will get the overall statistics for March in the early days of April. Today, I'm restrainedly optimistic," he said.
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