Ukrainian Economy in Brief – Newsletter, 23 May, 2023

On May 23, 2023, the Committee on Finance, Tax and Customs Policy will consider draft laws (DLs) on financial monitoring of politically exposed persons (PEPs) in Ukraine, which is the requirement under the 14th benchmark of the Memorandum with the IMF.

The main DL #9269, as we mentioned previously, was submitted by the Cabinet of Ministers of Ukraine and suggests treating a person as a PEP for an indefinite term.

In contrast, Oleksand Dubinskiy MP submitted the alternative DL which suggests limiting the PEP status to a one-year-period and financial operations below Hr.400,000 ($10,800).

The Committee will consider and decide on both, but we expect the government DL to pass during the vote.

This Tuesday the Committee on Finance, Tax and Customs Policy will also consider DL #5865 on the development of capital markets. It will amend the Law on the National Securities and Stock Market Commission (NSSMC) to enhance the NSSMC’s powers, independence and institutional capacity, and its cross-border and domestic cooperation mandate. The Parliament will vote on the DL in the first reading at the end of May.

The Cabinet of Ministers of Ukraine updated the concept of the corporate governance reform at the Gas Transmission System Operator (GTSO) following the vast criticism. 

The new DL #9311, which should meet Ukrainian obligations under the New Extended Fund Facility (EFF) Arrangement, was submitted to the Parliament. However, it seems that the amended text slightly solves all the issues. 

Other Topics of Interest

Ukraine’s GDP Growth is Downgraded, But It’s Doing ‘Marvelously,’ IMF Rep States

The IMF praised Ukraine’s government for steering the economic policy during wartime, even though the fund downgraded its growth outlook due to Russia’s strikes on energy infrastructure.

The DL #8401 on tax policy and administration prepared under the PMB is included in the parliamentary agenda for the end of May. The DL is benchmark №3 in the Memorandum with the IMF. The DL suggests restoring the pre-war setup of critical components of the tax policy and administration measures.

WORLD BANK PRIORITIES DEVELOPMENT 

The MoF supports the concept of the mandatory funded pension system in the DL of Sluga Narodu faction, however it doubts there are enough resources for its implementation during the war time.

This statement was made by the Minister of Finance Serhii Marchenko in his recent interview with Forbes.ua. The Minister emphasized that due to the security and defense priorities in budget expenditures and high inflation, the implementation of the pension reform would be postponed even if the Parliament adopts the DL.

OTHER KEY ECONOMIC ISSUES

The Committee on Finance, Tax and Customs Policy will reconsider the draft law №9107-1 on nationalizing banks of sanctioned owners on Tuesday, May 23. The Verkhovna Rada will vote on the DL at the end of May. As we reported earlier, the Parliament adopted the DL in the first reading, but couldn’t provide enough votes to adopt it in the second reading at the beginning of May.

During the Council of Europe Summit 46 Member States adopted a Declaration in which they agreed to set up a Register of damage caused by Russia’s war against Ukraine as the first component of the International Compensation Mechanism.