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Reforms Bulletin (First quarter 2019)
06 May 2019 18:31

Macro-financial stability and economic growth

2018 was marked by the highest pace of economic growth over the past 7 years: the economy has been growing 12 quarters in a row, the international reserves of NBU increased to USD 20.8 bln (highest indicator over the past 5 years), the inflation rate decreased to 9.8%, while the national currency has remained relatively stable since 2015. At the same time, the state debt reduced from 79% to 60.9% of GDP.

-          In three years the real GDP grew cummulatively by 8.4%, the minimum wage tripled (from USD 55 to USD 150), the level of shadow economy decreased from 40% of GDP in 2015 to 32% in the 2Q2018.  

-          The Government implemented the medium-term budget planning on state and regional levels and introduced a new practice for forecasting and budgeting for a 3-year term:

  • Forecast of economic and social development of Ukraine (earlier it was for 1 year);
  • Budget declaration (instead of Main direction of budget policy for 1 year);
  • Medium-term activity plan of the major budget fund managers.

-          In April, the Government approved an Action Plan to deepen cooperation with OECD for 2019-2020. In general, it aims at strengthening and improving the efficiency of the Ukrainian economy and improving socio-economic conditions, boosting employment, etc.

-          In 2018 the export to the EU reached 42.6% of total Ukrainian export (in 2013 – only 26.5%), while export to Russia further decreased to 7.7% (in 2013 – 23.7%).

Anticorruption

-          The establishment of the High Anti-Corruption Court has been successfully finalized, its launch will be the end point in creation of full-fledged and efficient system of anticorruption institutions in Ukraine.

-          On April 11, 38 judges of the High Anti-Corruption Court were officially appointed.  It should be recalled that according to legislation, within 30 days HACC judges shall meet and determine the kick-off date, elect the HACC leadership and select the investigating judges.

-          High Qualification Commission of Judges of Ukraine takes decisive steps to fill vacant positions of judges in local courts. In particular, the Commission holds selection of candidates for 600 forecasted vacant positions of local court judges.

-          The NABU detectives completed the pre-trial investigations in 176 cases. In the 2nd half of 2018, 44 persons were given notices of suspicion and cases as of 61 persons were completed. It is only the joint work of the three institutions – the NABU, the SAPO and the HACC –that will pave the way to ultimate success of Ukraine in combating corruption.

-          The start of obligatory exploitation of ProZorro public procurement platform in 2016 became one of the most significant qualitative changes in the economy in the past three years. It became convenient, reliable and, most importantly, profitable to trade with a state.

 

Decentralisation

-          As of 10 April 2019, 888 amalgamated communities (ACs) were formed: 38.7% of Ukraine’s territory and 9.1 mln or 26.0% of its citizens (excluding the temporarily occupied territories). The local budgets in ACs have increased almost 3.5 times since 2014: from USD 2.55 bln to USD 8.85 bln in 2018 (+1.54 bln or +21.5% in comparison to 2017).

-          As of the 1st quarter of 2019, the general fund of local budgets of Ukraine increased by USD 330 mln (+17.2%) compared to the same period in 2018, and made up USD 2.25 bln.

-          On 30 June, 66 newly ACs will elect their heads, while 30 more ACs – their councils.

-          In the past 5 years, the increased local budgets allowed to implement over 11.000 new projects (including into the energy efficiency and renewable energy sector) that enhanced quality of education, healthcare, administrative and social services.

-          The Government approved the procedure for the inclusion of part of the excise tax on fuel produced in Ukraine and imported into the customs territory of Ukraine, into the general fund of local self-government budgets in 2019.

Energy and energy efficiency reform

-          Improving energy efficiency is a priority on the way to ensuring energy independence of Ukraine. Among the achievements over the past 5 years:

  • “Warm credits”: over 500,000 Ukrainian households save up to 70% on utility bills.
  • Energy service: over 300 ESCO-contracts worth around USD 12.5 mln are being introduced. The estimated economy of energy resources is between 15% and 70%.
  • Energy management: over 200 local administrations introduced energy management/monitoring and save up to 15% on energy consumption.
  • Certification of households’ energy efficiency:  over 700 certifications issued to auditors.

-          In 2018, natural gas production in Ukraine has reached 20.9 mln m3 (or +0.5% in comparison to 2017), while, gas import has dropped by 75.2%.  At the same time, the oil and gas condensate production in Ukraine has grown by 4% (to 2150.2 thousand tons), electricity – by 2.5% (to 159.35 bln kWh).

-          In 1Q2019 over 860 MW of new renewable electricity capacities were installed, exceeding the total number installed during the entire 2018. In total, over 2200 MW of new objects producing the “clean” energy were launched. For this purpose, over EUR 2 bln were invested.

-          As of the end of 2018, around 7.5 thousand households generate electricity thanks to solar panels.

-          Ukraine signed an agreement with five leading European transmission system operators (GRTgaz S.A., N.V. Nederlandse Gasunie, Snam S.p.A., Eustream a.s. and Fluxys S.A.) to create a joint working group aimed at helping Ukraine to establish an independent TSO in line with the European law and at unbundling of Ukrainian GTS.

-          Denmark will provide soft loans for “green” projects under the Danida Business Finance program in Ukraine. The interest-free loans will be provided to finance infrastructure projects, including renewable energy and energy efficiency.

-          On 10 April, Ukraine and Germany signed Memorandum on strategic partnership in energy sphere.

-          On 5 April, Ukrainian Hydrogen Council, EHA, H2LV and DWV concluded a Memorandum of partnership in hydrogen energy sector

 

Privatisation

-          Small privatization has brought over USD 32.7 mln to the state budget since its launch. In this period 748 objects were sold through the ProZorro online platform with an average increase of the start price by 69%. 

-          In January, the Government approved a list of large enterprises for privatization in 2019 (around 20). The price of such enterprises exceeds UAH 250 mln (USD 9.5 mln). The list has no expiry date and can be amended.

-          At the same time, several large enterprises were excluded from the previously approved list for privatization in 2018: “Turboatom” (due to strategic value), several heat-generating stations (transferred to communal ownership), etc.

-          Privatization of Ukrgasbank has started in February 2019. The entry of IFC into the capital of Ukrgasbank will serve as a powerful signal for international investors and will contribute to the further development of Ukraine’s banking system as a whole.

-          On 16 May, it is planned to announce another competition for privatization of “Centrenergo”. The process has to be finished by 30 September 2019.

State administrative reform

-          The Strategy of state administration reform was renewed and extended. The aim is to increase the level of Ukraine’s competitiveness through improvement state administration, which has to become more effective and accountable to citizens, to work in interests of the society, to provide for a sustainable development and qualitative services.

-          Among main achievements in 2018

  • 58 directorates formed in 10 ministries and other central administrations, where over 500 specialists on reforms issues were employed;
  • For the first time the evaluation of public servants’ activity results was performed;
  • 54 new Administrative service centers on were launched (121 service on average);
  • The complex evaluation of state administration system was conducted under SIGMA program and methodology that is applied to countries-applicants for membership in the EU;
  • Ukraine named by Open Data Barometer among countries that reached the significant progress in data disclosure (+25 points in comparison to the last year).

Deregulation of business

-          Almost 900 data sets most necessary to civil society and business became obligatory for disclosure. Furthermore, the indicators of evaluation of open data development are being introduced in state central organs and local administrations. The progressive nature of legislative norms on open data testifies on intense development and Ukraine’s ambitious plans for world leadership in the sphere.

-          Ukraine International Trade Council analyzed the work performed in 2018 and set plans for 2019, including the full-scale launch of Export Credit Agency, other financial and credit mechanisms on exports support, finalization of the development, approval and implementation of cross-sectoral export strategies, preparation of Ukraine’s participation in Expo-2020 in Dubai.

 

Healthcare reform

The healthcare system becomes more patient-oriented. The current policy focuses on the health of each particular patient rather than illness. More attention is paid to prophylaxis, early diagnosis and disease prevention. Among the achievements are the following:

-          27 million Ukrainians have already chosen their family doctor (physician, therapist or pediatrician), and 76% of those patients who have chosen their doctors are satisfied with service quality.  

-          In 2018 the National Health Service of Ukraine started operation. Beginning of 2019, 97% of healthcare facilities joined the transformation of the primary healthcare and concluded contracts with NHSU (about 20% of them are private institutions).

-          The salary of doctors and nurses increased 2-3 times.

-          The governmental program “Affordable medicines” was further improved.

Agriculture

-          In January-February 2019 agricultural export grew by over 24% in comparison to 2018, amounting to USD 3.5 bln.

-          In February 2018 to January 2019, the volume of Ukrainian agri-food export to the EU amounted to EUR 5.9 bln (+6% or EUR 331 mln in comparison to 2017), placing Ukraine to the top three of largest agri-food importers to the EU after the US (EUR 12.4 bln) and Brazil (EUR 11.8 bln). Imports of agricultural products to Ukraine increased by 13%.  Thus, Ukraine reached surplus in amount of EUR 3.772 bln in agri-food trade with the EU.

-          In the 1Q2019, the territorial organs of the State Geocadaster have leased 594 land agricultural plots that are in the state property. The total area of the leased land plots was 10.66 thousand hectares with a total worth of over UAH 15.77 mln.

Reform of education

-          The Government has directed about USD 37.6 mln to improve access to Internet and computerization of the Ukrainian schools. 

 

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