Feedback on the IMF Memorandum: Next Wire Will not be Soon

UKRAINE - In Brief 04 Oct 2016 by Dmytro Boyarchuk

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Yesterday the IMF Memorandum was finally released. Our impression from the document – this year prospects for next wire are slim. At the document the IMF talks about submission of law on agriculture land circulation to the parliament and about utility-related social assistance program adjustment as benchmarks for next wire. The list is not long but the conditions are really difficult to implement. Law on agriculture land circulation. Formally the IMF talks only about submission of the draft to the parliament but as soon as it’s submitted it means that moratorium should be lifted (technically it should not be prolonged for next year) which means full-fledged agro-land market launch. This reform is badly needed but we do not see readiness of elites to do this step. And it’s not pressing issue for them. What’s more this reform is not widely supported among Ukrainians and should it happen that Poroshenko decides to push forward with land reform he might easily trigger real political crisis. A large-scale explanation campaign should precede this reform. We do not observe any similar efforts from the authorities. Social assistance. Again technically the IMF talks about “ensure that benefits remain within the allocated fiscal envelope”. But the main problem is poor efficiency of social assistance and low targeting level. Solving this problem requires institutional strengthening of welfare offices and Ministry of social policy. It was not done when such institutional strength was badly needed (in 2014-2015), we will be surprised if it's suddenly implemented in the nearest future. We even do not discuss pension reform and with the demand to do something with simplified taxation...