How Ukraine prepared for the 2nd review of the IMF program over the last month
Over the past month, Ukraine has moved forward in fulfilling its international obligations. Necessary budget changes and corporate reform of the GTSO were signed. Moreover, the government submitted a bill on strengthening the institutional independence of the SAPO.
However, Ukraine missed three more deadlines. One of them concerns the adopted DL on restoring e-declarations for public officials. Another two – on returning of tax audits and the financial monitoring over PEPs - have not even passed first reading yet.
The crucial thing is that the next review of the EFF program with the IMF will be held at the beginning of October. So, Ukraine doesn’t have enough time to show significant progress and responsible implementations of obligations given to international donors.
The President signed budget amendments required by the Memorandum. On 18 August the President signed the DL #9346-1 to reinstate the articles of the Budget Code that allow preparation of the medium-term budget framework, elaboration of the debt strategy, and ringfencing risks from guarantees. The DL fulfills structural benchmark #10 under the EFF program. It also makes necessary changes to fulfill the structural benchmark #12.
As we reported earlier, according to the DL:
- amendments to the state budget law can be considered only when the MoF supports them;
- preparation of the medium-term budget framework restores from the 01 January 2024;
- the development of the State Debt Management Strategy restores in 2023;
- state guarantees provided by the decisions of the CMU are limited to the 3% of the planned general budget revenues; the limit for the state guarantees based on international financial support will be determined by the state budget law.
The President finally signed the DL on corporate governance reform at the GTSO. The DL #9311-1-d came into force on September 03. The DL allows to start the process of transferring the shareholding of the GTSO directly to the Ministry of Energy and adopting the new charter. However, these steps are much later than deadline set in the Memorandum for the end-June (Structural Benchmark #8).
The CMU approved the DL to restore tax inspections which required in the Memorandum with the IMF. Previously, proposals on tax inspections restoration were eliminated from the DL #8401 under pressure of Rostyslav Shurma, Deputy Head of the Office of the President of Ukraine.
The new governmental DL suggests to restore tax inspections from October 01. However, the DL hasn’t been submitted to the Parliament yet.
Considering legal terms of DLs preparation, the DL on restoring tax inspections can’t be adopted until October 01 even in the first reading. It means that there is no enough time to adopt the DL before the second review under the EFF Arrangement.
Moreover, it would be necessary to change the text to postpone proposed terms of the inspections’ restoration.
The President vetoed the DL on asset declarations of public officials, the public register will be opened immediately after the law comes into force. On September 20 the Parliament supported the presidential propositions to open an access to the public register immediately with the restoring e-declarations.
Still it isn’t clear whether the President will veto the second DL on this issue #9587d. The text adopted by the Parliament was also criticized for several provisions. Particularly this is about an amendment which absolves public officials if it becomes revealed that they have not declared assets worth up to UAH 1.3 mln.
Let me remind that MPs supported the DL with the provision which postpones public access to the register of asset declarations for a year.
On the Presidential Office’s website representatives of civil society registered a petition with the demand to veto the DL. In three days, the petition became the leader by collected signatures.
Ukraine is obliged to restore the submission of asset declarations for public officials under the Structural Benchmark #14 of the Memorandum with the IMF. The deadline to fulfill it expired in the end-July.
This week the Parliament will consider the DL on improving the risk-based approach for PEPs. Last plenary week the coalition faction Sluga Narodu initiated to postpone the consideration of the DL #9269-d.
The DL is included into parliamentary agenda for the current week. However, most likely, the voting for the DL will be postponed once more because of the lack of votes among MPs even for the first reading.
It was developed to fulfill the Structural Benchmark #14 of the Memorandum with the IMF. The deadline under the Memorandum to adopt the DL is set for the end- September 2023.
The Cabinet of Ministers submitted to the Parliament the DL on strengthening institutional autonomy of SAPO. The DL #10060 is said to be aimed to improve selection procedures, capacity to regulate organizational activities, and mechanisms for discipline and accountability as it stated in the Structural Benchmark #21 of the Memorandum.
The group of MPs, including Anastasiia Radina, Head of the Committee on Anti-Corruption Policy, and Yaroslav Zhelezniak, First Deputy Head of the Committee on Finance, Tax and Customs Policy, is going to submit the alternative DL.
It suggests more necessary provisions to enhance institutional independence of the SAPO. Its main goal is to ensure that crucial provisions (such as legal entity status for the SAPO) won’t be eliminated during the reviewing process.
The DL will be a part of the legislative package to strengthen Ukrainian anticorruption infrastructure. Other two DLs suggest to cancel the statute of limitations for corruption crimes and increase the total number of NABU employees.
The deadline to make this step and adopt the legislature is set for end-December 2023.
Iaroslav Zhelezniak
