10:31 Oct. 13, 2016
Fatigue, vested interests, and populism threaten Ukraine's "longest and most successful" reform process, Natalie Jaresko says
"There's no country in the world that has been in such dire circumstances and yet turned around the economy in such a short period of time," said Natalie Jaresko, who served as Ukraine's Finance Minister from December 2014 to April 2016. She spoke in Washington on October 11 at a discussion sponsored by the Atlantic Council and the US-Ukraine Business Council.
In 2009, Ukraine's GDP declined 15 percent as a result of the global financial crisis, and it remained stagnant or declining through 2015. But through an infusion of USD 25 billion in global support and leaders' efforts to make serious fiscal adjustments, restructure its debt, reform its energy sector, and get control of its banking system, Ukraine is expected to see 1.5 percent GDP growth this year.
Ukraine's "longest and most successful reform process," as Jaresko put it, has not only spurred GDP growth; there has also been an increase in local currency deposits, inflation is dropping, lending rates are gradually being reduced, and credit has been expanded. This dramatic about-face has occurred in spite of Russia's occupation of Ukraine's industrial base, the war in eastern Ukraine, the Kremlin's broader hybrid war, and an estimated 1.7 million internally displaced persons needing assistance.
Jaresko cautioned that these reforms are not yet irreversible, and that Ukraine is not moving quickly enough; fatigue, vested interests, and populism are stalling the process. To revitalize it, she urged an international consortium of bilateral, multilateral, and private donors to pledge USD 25 billion for a five-year infrastructure fund conditioned on more structural reform.
"We must now win over the hearts and minds of Ukrainian society," she said. "Citizens in Ukraine are fatigued, and rightfully so. The immediate effects [of reform] on the population have been painful." To overcome this fatigue, a substantial chunk of the USD 25 billion would be used to modernize schools and hospitals, revamp government with hardware and software, invest in roads and bridges, and fund other projects that will "change and improve the daily lives of citizens," she said.