Remarks by Anna Bjerde at the conference on reform in Ukraine

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Prime Minister Å imonytÄ—, Prime Minister Shmyhal, Commissioner Dombrovskis, President Renaud-Basso, Excellencies, Heads of Delegation, Ladies and Gentlemen.

It is very nice to be here today for my first conference on reform in Ukraine.

I know how important these events were in helping to align Ukraine’s partners with the country’s key reform priorities and Euro-Atlantic aspirations.

The past 16 months have tested our resilience to sudden, unexpected and prolonged shocks. For a country – its economy and its social fabric – resilience is a reflection of how it has prepared for an uncertain future.

A world tour reveals how resilient countries have been in the face of the COVID-19 pandemic. Some have done well, others less. The costs of doing less well are almost always borne by the poor. It is for this reason that the World Bank and more broadly the international community urge and support the countries to undertake economic and structural reforms, not only for the challenges of today but also for those of tomorrow.

Ukraine joins countries that have strived to undertake significant reforms to transform their economies. This is particularly true since the post-Maidan crisis of 2014-2015. And it may seem to many of us that there are few countries where the reform process is more difficult.

The good news is that thanks to these reforms, Ukraine is in a better position to emerge from the pandemic than many thought. Our initial projection at the World Bank, for example, was that the economy would contract by almost 8% in 2020; the actual drop was half of it. Gross international reserves at the end of 2020 were $ 10 billion higher than forecast. More importantly, there are far fewer poor people than expected. More on this shortly.

Consider three areas of reform that have contributed to these results.

First, no area of ​​the economy has contributed as much to the economic crisis of 2014-2015 as the banking sector. Powerful interests have captured the biggest banks, distorted capital flows and strangled economic activity. Fortunately, Ukraine has developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank has been nationalized and is now making a profit. More importantly, it is being prepared to be privatized.

Second, COVID has stopped and threatened to reverse a five-year trend of poverty reduction. Fortunately, the authorities responded. The government had spent around 4.7% of GDP on social programs with limited impact on poverty. Almost half of those resources went to an energy subsidy that spread to one in two households in the country. The government has restructured the system by increasing tariffs and targeting resources to the poor. It works. Transfers to the poorest fifth of the population are increasing dramatically, from just 37% in 2019 to 50% this year, and are expected to reach 55% in 2023.

Third, the health care system itself. Ukrainians live ten years less than their neighbors in the EU. Epidemiological vulnerabilities are exacerbated by a health care delivery system centered on outdated hospitals and over-reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a free primary care package for all Ukrainians. The law transforms Ukraine’s constitutional commitment to free health care from an aspiration into specific essential services that are actually provided.

The performance of these sectors, which were on the “front line” during COVID, demonstrates the cost-effectiveness of the reforms. The job now is to address the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. There are some 3,500 state-owned companies, most of which are loss-making in industries ranging from machine building to hospitality. Ukraine needs fewer state-owned enterprises and the remaining ones need to be better managed.

Ukraine has made progress. The first round of corporate governance reforms has been successfully implemented in public banks. And, in the energy sector, Naftogaz was unbundled in 2020. The electricity sector is also now gradually liberalized. Tariffs have increased and reforms are expected to support investments in aging electricity generation and transmission infrastructure. Investments in renewable energies are also on the rise.

But there are areas that need attention and here I will focus on two. First, we urge that the management functions of the supervisory boards of SOEs and their members remain free from interference and have the space to do their jobs. We also call for the National Bank of Ukraine to retain its role as independent supervisor of the banking sector. The World Bank Group has supported reforms aimed at improving the governance of state-owned enterprises and state-owned enterprises in Ukraine in the past and will remain firm and consistent in our view that progress in this area cannot and must not be reversed. .

The second challenge is to strengthen the rule of law – and many other speakers have also pointed out. In recent years, the country has put in place – and pledged to protect – new institutions to fight corruption, which have been widely supported by the international community, including the World Bank. These institutions – including the National Anti-Corruption Office of Ukraine and the High Anti-Corruption Court – are still maturing and must be allowed to function professionally and independently. And they must be supported by an impartial, professional and independent judiciary. The decision to re-establish an independent Higher Qualifications Council is a welcome step in this direction.

Let me conclude by addressing what will be the biggest test of resilience for Ukraine, and for all of us, and that is climate change.

President Zelenskyy announced his commitment to achieve carbon neutrality and set ambitious targets for Ukraine’s nationally determined contributions to the Paris Agreement.

This is a welcome ambition that can be achieved – in part – by deepening reforms in the energy and transport sector, including continuing to deploy cleaner energy solutions and opening up the state-owned rail company to competition. In addition, we look forward to working with our counterparts in Ukraine to prepare a new product that we recently launched – the National Climate and Development Report. Ukraine will be among the top 25 countries in the world for which we are writing this report, and one of four in the Europe and Central Asia region. The report will examine the alignment of climate action and development efforts.

In conclusion, it can be easy to get frustrated with the pace of reform in Ukraine. Two steps forward, often followed by one and sometimes two steps back, can lead to pessimism.

But if we look back over the past five years at the scale of Ukraine’s challenges; are realistic about the forces that resist progress; and recognize what has been accomplished, we must remain confident about the future direction of the country.

There is too much at stake to go back. We know from our work that a child born in Ukraine today will only be 63% as productive when he grows up as he would be if he had received a full education and full education. health. This must change.

And we know that even at the growth rates of the post-Maidan recovery, it will take almost a century to reach Germany’s current income levels and about fifty years to reach Poland. It needs to improve.

Ukraine has made great strides in accelerating these results. He has a lot more to do.

At the World Bank, we are proud to have supported Ukraine in its efforts to build a better future. And we, too, look forward to having a lot to do, hand in hand with Ukraine, as it charts the way forward.

Thank you so much.


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