Implementation of the IMF’s beacons: where we are now and what are the risks of delaying reforms?
The next review of the government’s commitments to the IMF is scheduled for September, but it is already clear that there are delays in implementing the IMF’s structural beacons.
It is the IMF that other donors look to when assessing Ukraine’s progress on the path of reform. Experts and participants close to the process commented to Ukrinform on what exactly went wrong and what the risks are.
The IMF approved a four-year, USD 15.6bn programme for the war-torn Ukraine on 31 March. Already in April, Ukraine received the first tranche of more than USD 2.7 billion.
The IMF programme envisages the implementation of 23 IMF structural beacons. These are reforms aimed at maintaining economic stability in the context of high economic uncertainty due to the war, the need to strengthen state institutions and European integration. Implementation is reviewed on a quarterly basis, and after the first review in late June, after fulfilling the first five IMF beacons on time (by the end of May), Ukraine received the next tranche of USD 890 million.
However, further implementation of obligations to the IMF is delayed. Ukraine has overdue at least two beacons, which are due by the end of July. There is also uncertainty about another one (relating to tax policy). Therefore, there are certain risks that Ukraine will receive a negative assessment during the next “audit” of the IMF agreement scheduled for the end of September.
Hlib Vyshlinsky, Executive Director of the Centre for Economic Strategy, considers the status of public officials to be the most problematic issue (Beacon 14). In May, the government submitted to parliament draft law No. 9269, which brings the status of public officials back in line with EU and FATF standards. If passed, the law will give senior officials the status of public officials for life.
According to the expert, there is also the issue of electronic declaration of national public figures, in respect of whom banks should carry out additional financial monitoring. “But I think there will be discussions here, because it is proposed to grant lifetime status of public officials to all those involved in political life.
This is too harsh and may discourage people from working for the state at all, as it will create problems with banks for the rest of their lives,” Vyshlinsky said. However, he is confident that the IMF will give the Ukrainian authorities the opportunity to correct what is not in line with the terms of the agreement.
“I understand that the biggest problem is timing and what has been done so far. The next IMF mission is due at the end of September, and it is likely that the Ukrainian authorities will be given a chance to fix everything. In addition, MPs passed a lot of legislation in the summer,” Hlib Vyshlinsky comments to Ukrinform.
Yurii Gaidai, senior economist at the Centre for Economic Strategy, also believes that the situation is problematic and carries risks for Ukraine.
“The situation with the IMF is quite serious, because there are a number of beacons for which we are already overdue, and there are doubts that some of our efforts will be credited by the IMF at all,” says the economist.
And he cites the example of the same tax law, which changed the criteria for those subject to inspections in the last minute. “The list was narrowed down to certain risky industries, such as gambling, financial services and excisable goods. This was not agreed with the IMF, and there is a risk that they will not count the implementation of the structural beacon and postpone its deadlines with a clearly spelled out requirement – what exactly should be done,” explains Gaidai.
Among the beacons that are “hanging”, Gaidai mentioned the transfer of GTSOU to the Ministry of Energy and electronic declaration.
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