President of Ukraine Volodymyr Zelensky during a meeting with World Bank President David Malpass has confirmed his intention to carry out land reform, complete the unbundling of Naftogaz, demonopolize the economy and state-owned enterprises, and respect the independence of the National Bank. Malpass wrote on his FT blog following a meeting with Zelensky that at their meeting Zelensky had confirmed several key growth measures that will be mentioned at the meetings with G7: implement the land reform, split ownership of Naftogaz’ transit assets, demonopolize the economy and state-owned enterprises, and respect the independence of the central bank.
According to Malpass, to attract investment in Ukraine, it is necessary to eliminate monopolies in favor of market competition and strengthen the rule of law.
Capital should be send to the most productive enterprises but not to influential privileged circles and oligarchs, he said.
Malpass also emphasized the importance of land reform.
The country has the largest stock of agricultural land in Europe, but the yield per hectare is only a small part of the crop in France and Germany. At the same time, one oligarch controls a group of companies that produces more than 80% of domestic output of several types of mineral fertilizers, the banker said.
As reported, World Bank President David Malpass on August 22-23 for the first time visited Ukraine after he has taken this post on April 9, 2019.
NJSC Naftogaz Ukrainy has completed repayments under the loan agreements worth $500 million received under the World Bank’s guarantees and state guarantees, the press service of the company has reported.
According to Naftogaz, within the framework of these loan agreements, which were signed on December 30, 2016, the company managed to purchase about 5 billion cubic meters of natural gas from the European direction over two years.
“In general, since 2014, Naftogaz has redeemed the state-guaranteed loan debt amounting to about $3.2 billion in a timely manner and in full. Naftogaz’s loan portfolio has decreased by 6.6 times since 2014 and is a record low,” Naftogaz CEO Andriy Kobolev said.
The company noted the important role of further cooperation with the creditors and noted that this year the company plans to pump 3 billion cubic meters of gas more into underground gas storage facilities (20 billion cubic meters) compared to the previous year.
The World Bank has affirmed the forecast for growth of Ukraine’s GDP at 2.7% in 2019, World Bank Country Director for Belarus, Moldova and Ukraine Satu Kahkonen has said.
In 2018, GDP growth was 3.3%, in 2019, the growth would slow down, she said at a press conference in Kyiv on Thursday.
Ukraine on February 28 raised a loan of EUR 529 million from Deutsche Bank under the guarantee of the International Bank for Reconstruction and Development (IBRD, the World Bank Group), according to the website of the Ministry of Finance. The funds were received in two tranches: an A tranche in the amount of EUR240 million with maturity in four years and a B tranche in the amount of EUR289 million with a final maturity in ten years (four years and six months after raising the funds, the loan is subject to gradual repayment with certain amounts every half a year).
The second part of the guarantee in the amount of $375 million in the euro equivalent of the total amount of the World Bank guarantees of $750 million was used for the loan.
As reported, the World Bank Board of Executive Directors on December 18, 2018 approved the provision of guarantees to Ukraine in the amount of $750 million in support of state policy.
The World Bank has kept the forecast for Ukraine’s GDP growth in 2018 at 3.5%, Lead Economist and Program Leader covering Belarus, Moldova and Ukraine Faruk Khan said in Kyiv on Tuesday.
“Economic growth is projected at 3.5% in 2018 if pending reforms in anticorruption, land markets, state-owned banks, and privatization can be advanced in the next few months. This would provide an important signal to investors. If reforms are delayed, growth could drop below current levels in an uncertain macroeconomic environment as financing risks rapidly increase,” the World Bank said in a press release.
According to the World Bank’s economic update for Ukraine, the growth outlook has become more uncertain, but safeguarding macroeconomic stability and completing key pending reforms by July 2018 to bolster investor confidence can help boost growth in the next two years.
“The complex political environment ahead of the 2019 elections is affecting reform prospects, but a window of opportunity exists to complete key reforms by July 2018. Reforms in land markets, the financial sector, anticorruption, and privatization would not only address medium-term growth bottlenecks, but also provide an important immediate signal to strengthen investor confidence,” the World Bank said.
The World Bank’s experts said that addressing macroeconomic vulnerabilities and containing inflationary pressures to reduce cost of funds for the private sector is also important to strengthen investor confidence. Under such a scenario with continued improvements in investor confidence, economic growth could improve to 3.5% in 2018 and 4% in 2019, with fixed investment growing by about 15%.
