0 $
2,500 $
5,000 $
2,088 $
SEPTEMBER 2020

Ukraine Essentially Entirely Sells Out For EU Loan

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Ukraine Essentially Entirely Sells Out For EU Loan

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On August 25th, an extraordinary session of the Ukrainian Parliament took place.

The main item on the agenda was presumably the increase of the minimum wage to a round 5,000 hryvnia ($182).

A very obviously less important item on the agenda was another piece of legislation – the EU Credit Memorandum, where Ukraine assumes many obligations.

It was approved by 249 MPs (out of 450), President Volodymyr Zelensky’s “Servants of the People” party couldn’t approve it alone, so they got some help from two other factions.

The document on the allocation of a loan to Ukrainian side was signed in July by the head of the Ministry of Finance Sergei Marchenko and the chairman of the National Bank Kirill Shevchenko. The bill itself was introduced to Parliament by Zelensky.

The loan is issued in the amount of 1.2 billion euros at 0.125% per annum for 15 years. The first tranche with 600 million euros should be received in the near future, and for the second part, certain conditions must be met.

The Rada’s decision is necessary here, since a loan from the European Union is given against state guarantees that only parliament can give.

Also the bill could only be rejected or approved, it couldn’t be amended in any way.

Following is a brief description of what Ukrainian parliament agreed to in return for the loan:

  1. The salaries of supervisory board members need to be exquisitely high.

Ukraine has pledged to carry out a “reform of state enterprise management.” Namely, to create independent supervisory boards at the largest 15 state-owned companies “with competitive remuneration” for their members.

During quarantine, these board members could only receive salaries of around 40,000 – 50,000 hryvnia (approx. $1,600). Prior to that they received an average of 400,000 hryvnia ($14,500).

They even complained to Zelensky that they could barely live with such small salaries during the tightening.

Now Parliament has pledged to abolish restrictions on payments to members of supervisory boards. To do this, you need to adopt amendments in a separate law. Zelensky, already tried to submit it to parliament in the summer, but then withdrew it due to public outrage.

Therefore, an interesting question is how he is going to hold them out now. It is possible that it will be postponed for a while after the elections.

  1. Public procurement of medication:

The government has pledged to transfer all state purchases of drugs and medical devices to the state company Medical Procurement of Ukraine. It will create an “independent supervisory board” that will oversee the company’s activities.

Of course, most procurements are likely to be carried by the “right” foreign companies. This is significant since Ukraine purchases a lot of medication due to the pandemic.

  1. Reform of taxes and custom duties, as well as reappointment of the heads of the respective departments.

The head of the Tax Service, Aleksey Lyubchenko, has already been appointed, as well as the acting head of customs, Igor Muratov, and Andrey Pavlovsky has been appointed in his place.

However, while Lyubchenko’s status is in limbo. He was fast-tracked in the midst of the coronavirus. Then, at the request of the West, an amendment to the law was adopted, according to which those appointed under the “simplified” procedure hold their posts only until the end of quarantine. Then a new competition should be held. It is possible that the EU will try to promote people it could communicate with easier.

  1. Transfer of control over the judicial system to foreigners.

The memorandum records the almost complete transfer of control over the judicial system to foreigners. This was already fixed in the agreement with the IMF, and today this “success” has been consolidated.

The government continues to undertake to create a new High Qualification Commission of Judges (VKKS) of Ukraine with international participation. And also to provide the Europeans with the right to form an Ethics Commission, which will assess the so-called “integrity” of judges and judicial authorities – VKKS and the High Council of Justice.

Economist Viktor Skarshevsky called this point a sale of Ukraine’s sovereignty. And according to lawyer Rostislav Kravets this is “just another confirmation that the country is under external control.”

  1. Anti-corruption bodies.

The document outlines Ukraine’s commitment to create a “depoliticized commission” to select a new chief prosecutor in the Anti-Corruption Prosecution office.

This means that the West is closely involved in the selection of a successor to Nazar Kholodnitsky, who recently resigned. And, most likely, foreigners expect that the new person will actively interact with the current head of NABU, Artem Sytnik, who is considered to be oriented towards Western structures.

  1. Cash registers everywhere.

The memorandum stipulates the expansion of the use of cash registers by Ukrainian business.

This means that entrepreneurs are unlikely to be able to count on the abolition of compulsory cash registers or at least softening the conditions for their use, despite the fact that such a bill was registered in Parliament and many small business representatives hoped for its adoption. But the Memorandum with the EU minimizes the likelihood of any indulgence.

  1. Bureau of Financial Investigation.

Among the terms of the memorandum with the European Union is the adoption by the Cabinet of Ministers of Ukraine of a decision on the “phased dismantling” of the tax police. As you know, it still operates within the framework of the already disbanded State Fiscal Service.

A bill is now to be drafted to create a new agency for financial investigation. Its field of activity should be “serious economic and financial crimes.”

  1. “Market prices” for gas for the population.

The Ukrainian authorities have guaranteed the European Union that they will give consumers the opportunity to choose their gas supplier. They will also introduce tariffs on the gas market for the population that “reflect costs.” This point is also in the memorandum with the IMF and is already being implemented – since August 1st, a gas market for the population has been operating in Ukraine.

All of these are already fact, the legislation passed and all of the necessary following legislation also needs to be approved, since otherwise no financial assistance would be coming.

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