MP Yaroslav Zhelezniak: Developments in Ukraine’s parliament on economic reforms, international obligations — Issue 72

Editor's note: This is issue 72 of Ukrainian lawmaker Yaroslav Zhelezniak's weekly "Ukrainian Economy in Brief" newsletter, covering events from Sept.

8, 2024. The digest highlights steps taken in the Ukrainian parliament related to business, economics, and international financial programs. The Kyiv Independent is republishing with permission.

Benchmarks and soft commitments in the memorandum with the IMF

Lawmakers haven't adopted the draft law on increasing taxes, insist on adopting customs reform first.

The Verkhovna Rada, Ukraine's Parliament, was unable adopt draft law #11416-d on increasing taxes. There was a lack of two votes to adopt the draft law in the first reading. The main reason was that lawmakers insisted to consider draft law #6490-d on customs reform  in the second reading beforehand.

The draft law on increasing taxes will be considered during the next plenary week scheduled for Sept.

17-20.

Explainer: Ukraine's £15 billion IMF loan program Maxwell Kushnir is a research analyst at the IMF. The contents of this article do not represent the views of any entity associated with the IMF, including staff, management or members of the Executive Board.

Only publicly available data is used. Russia's invasion has caused untold devastation acros...

All key Ukrainian business associations supported the adoption of draft law #6490-d on customs reform, but parliament did not consider it last week. All key business associations in Ukraine sent letters of support for draft law #6490-d on customs reform and called on the Verkhovna Rada to pass the law.

Among those business associations who supported draft law #6490-d on customs reform are the American Chamber of Commerce, European Business Association, Ukrainian Business Council, Union of Ukrainian Entrepreneurs (SUP), Ukrainian Agrarian Council, Ukrainian Agribusiness Club and others. But the Verkhovna Rada did not consider the draft law because of numerous decisions regarding personnel changes in the Cabinet of Ministers and the President's Office. Draft law #6490-d may be considered in two weeks as the next plenary meetings are scheduled for Sept.

17-20. The Budget Committee recommended adopting amendments to the state budget for 2024. The Budget Committee recommended adopting draft law #11417 on changes to the state budget for 2024 to increase budget spending on defense.

After the Committee's meeting, draft law #11417 suggests the following new sources of budget revenues:

• about Hr 115.4 billion (£2.8 billion) from the reduction of expenses for servicing and repayment of the state debt, instead of Hr 125.6 billion (£3 billion) in the Cabinet of Minister's version;
• about Hr 216 billion (£5.2 billion) is planned to be raised from domestic government bonds placement, instead of Hr 160 billion (£3.8 billion) in the Cabinet's version;
• about Hr 100 billion (£2.4 billion) from the over-performance in collection of taxes and fees, instead of previously planned Hr 76 billion (£1.8 billion);
• about Hr 12.7 billion (£308 million) in revenue from excise taxes on fuel and tobacco products, instead of Hr 13.7 billion (£332 million);
• about Hr 30 billion (£728 million) from new tax changes in the draft law #11416-d, instead of Hr 125 billion (£3 billion) as was previously planned;
• about Hr 25.5 billion (£618 million) from the reduction of current expenses of the general and special funds and rejection of new ones.

The main suggestions of reducing expenses are the following:

• Hr 11.2 billion (£272 million) reduction of the budget of the Strategic Industries Ministry;
• Hr 8.6 billion (£208 million) of unused funds of the Social Policy Ministry;
• Hr 4.5 billion (£109 million) from the rejection to replenish the Reserve Fund as the Cabinet proposed;
• Hr 1 billion (£24 million) from the economy of funds in several ministries and other state bodies;
• Hr 662.2 million (£16 million) from the State Customs Service;
• Hr 227.8 million (£5.5 million) from reducing expenses for financing different state bodies.

Draft law #11417 may be considered in two weeks as the next plenary meetings are scheduled for Sept.

17-20.

World Bank priorities

The Parliament adopted in the first reading a draft law on privatizing state banks. The Verkhovna Rada adopted in the first reading draft law #11474 to address the issue of privatization of the state banks. The draft law is aimed at expanding the range of potential investors, allowing the sale of any share of the state bank, including international donors to participate in the selection procedure of financial advisers for the selling process, and implementing other recommendations of the World Bank.

Other draft laws from the World Bank requirements which were included to the agenda haven't been considered as the agenda was changed in favor of staff changes in the Cabinet of Ministers. These draft laws will be considered during the next plenary meetings scheduled for Sept.

17-20. In particular the agenda will include draft law #5819 on regulating rating agencies, #11131 with the amendments to the Budget Code to restore medium-term planning of local budgets, the draft law #11063-d on the State Agrarian Register, #10143 with the amendments to the Bankruptcy Code and the new draft law #11520 on public procurements.

Ukraine may target record bank profits with further tax increase to plug budget hole

Ukrainian banks continue posting record profits, earning nearly Hr 120 billion (£2.9 billion) in the first seven months of 2024. The result is 22% higher than the same period last year, analytics website Opendatabot reported. As the Kyiv Independent previously reported, Ukrainian banks are enjoying...

Other key economic issues

The head of Ukrenergo was dismissed, two international members of the Supervisory Board resigned over an allegedly "politically motivated" decision.

On Sept.

2, the Supervisory Board of Ukrenergo terminated the powers of the company's Chairman Volodymyr Kudrytskyi. Only members related to the Ukrainian state authorities voted for this decision. Two independent international members of the Supervisory Board - former presidents of the European Network of Transmission System Operators for Electricity Peder Andreasen and Daniel Dobbeni - resigned the next day, considering the decision politically motivated.

The head of Ukrenergo Volodymyr Kudrytskyi said that the decision of the Supervisory Board of the energy company to dismiss him has nothing to do with the issue of security of Ukrenergo. Security was named as a reason to dismiss Kudritskyi in the decision of the Supreme Commander-in-Chief's Office led by the President Volodymyr Zelensky. The Ukrainian authorities made staff changes in nine ministries of the Cabinet of Ministers and among the Presidential Office deputies.

Last week, the Verkhovna Rada approved the decisions of Ukrainian authorities to make personnel changes in the Cabinet of Ministers. Moreover, there were several changes in the Presidential Office. Andrii Sybiha, former deputy head of the Presidential Office from 2021-2024 and the first deputy foreign affairs minister from April 2024 was appointed as the foreign affairs minister instead of Dmytro Kuleba.

Another two deputies of the Presidential Office were appointed as ministers as well - Oleksii Kuleba took office as the deputy prime minister for the restoration of Ukraine and minister for Communities and Territories Development of Ukraine. Mykola Tochytskyi became the Culture and Strategic Communications Minister. Olha Stefanishyna, the deputy prime minister for European and Euro-Atlantic Integration from 2020, has got an additional position as the justice minister, replacing dismissed Denys Maliuska.

Who's who in Ukraine's biggest wartime government reshuffle

At a crucial juncture of the war against Russia, President Volodymyr Zelensky has undertaken a major reshuffle of his government, insisting "new energy" in government was needed "today." "These steps are only associated with strengthening our state in various sectors -- international politics and di...

Vitalii Koval was dismissed as the head of the State Property Fund of Ukraine and was appointed as agrarian policy minister. Parliament hasn't voted for the new head of the SPFU yet. Svitlana Hrynchuk, former deputy energy minister, was appointed as environmental protection and natural resources minister.

Nataliia Kalmykova, former deputy minister of defense for social development was appointed as veterans affairs minister. Herman Smetanin, the former director of the JSC "Ukrainian Defense Industry," was appointed as strategic industries minister and Matvii Bidnyi became youth and sports minister after serving as acting minister since November 2023. Regarding changes in the Presidential Office, former Deputy Justice Minister Iryna Mudra, former Reintegration of Temporarily Occupied Territories Minister Iryna Vereshchuk, and former Head of the Zakarpattia Regional Administration Viktor Mykyta were appointed as deputy heads of the Presidential Office.

Moreover, deputy head of the Presidential Office Rostyslav Shurma was dismissed from his position.

Despite expectations, former Strategic Industries Minister Oleksandr Kamyshin did not replace him as the Presidential Office deputy and was appointed as an adviser to the president on strategic issues.

Zelensky appoints new advisors, deputies amid government reshuffle

President Volodymyr Zelensky has appointed his speechwriter Dmytro Lytvyn and former Strategic Industries Minister Alexander Kamyshin as his new advisors as part of a major government reshuffle, according to presidential decrees published online.