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MP Yaroslav Zhelezniak: Developments in Ukraine’s parliament on economic reforms, international obligations — Issue 55

by Yaroslav Zhelezniak May 14, 2024 3:35 PM 5 min read
The flag of Ukraine flies in front of the building of the Verkhovna Rada, Ukraine's parliament, on Aug. 24, 2023, in Kyiv. (Andrii Nesterenko/Global Images Ukraine via Getty Images)
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Editor’s note: This is issue 55 of Ukrainian lawmaker Yaroslav Zhelezniak’s weekly “Ukrainian Economy in Brief” newsletter, covering events from May 6–12, 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.

IMF benchmarks in focus

How the Verkhovna Rada supports draft laws for meeting requirements of the international financial programs.

Government officials often use the argument that reforms cannot be implemented due to confrontation from the Ukrainian Parliament. This argument is usually used to avoid adding new reforms to commitments within international financial support programs.

Our team decided to verify whether consideration in the Verkhovna Rada is really an issue. For this purpose, we analyzed the results of consideration and voting for draft laws which have been already adopted to meet previous requirements since the beginning of the full-scale war.

The brief conclusion is that there is no problem in the Parliament to adopt necessary draft laws. None of the laws were rejected by the Parliament, and the level of their support by votes significantly exceeds the required 226 votes.

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From the beginning of the full-scale war against Ukraine, the Verkhovna Rada of Ukraine fully adopted nine draft laws to meet the requirements of Memorandums with the International Monetary Fund (IMF). Several are in progress. It took on average 49 days from submission of draft law to its adoption by the Parliament and 35 days from the Committees’ first recommendation to consider draft law.

Each initiative received on average 276 votes on the final voting (at least 226 votes are needed for the draft law to pass). None of these draft laws were rejected or sent for the re-consideration. Two draft laws were fully adopted in the first reading, without the second reading needed.

During the same period the Parliament also adopted six draft laws under the World Bank Development Policy Loan (DPL) and the EU macro financial assistance program which ended in December 2023. Among these draft laws, none were rejected or sent back for reconsideration. On average these initiatives received 261 votes during the final voting.

World Bank priorities and obligations to the EU

The Parliament made a first step to update bankruptcy procedures.

The Verkhovna Rada adopted in the first reading draft law #10143 with the amendments to the Bankruptcy Code. The draft law is aimed to implement Directive 2019/1023 of the European Parliament and the Council of the European Union and introduce preventive restructuring procedures.

This step is one of Ukraine’s obligations under the World Bank DPL and draft of the Ukraine Plan (Ukraine Facility mechanism). Currently, the draft law is being prepared for the second reading with a shortened period of preparation.

Other key economic issues

The President signed draft laws to extend martial law and general mobilization in Ukraine. Martial law and mobilization were extended from May 14 for another 90 days until Aug. 11.

Ukraine could recruit up to 20,000 convicts into army, Justice Minister says
Ukraine could fill its ranks with as many as 20,000 convicts in a move that would also help ease overcrowding in Ukrainian prisons, Justice Minister Denys Maliuska told BBC Ukraine in an interview published on May 10.

The Parliament adopted a draft law to close the corruption scheme of illegal grain export.

The Verkhovna Rada adopted in the second reading draft laws #10168-2 and #10169-2 to combat a so-called ‘black grain’ scheme. Under this scheme the “grain corridor” has been used by bogus traders to export so-called “black grain” which was bought for cash or illegally harvested from state land. It was used for tax evasion and money laundering and never getting hard currency back to the country. Draft laws were designed by the Parliamentary Temporary Investigative Commission on Economic Security after relevant investigations.

National Bank: Ukraine’s losses from Polish blockade partially offset by maritime trade
Losses caused by the Polish blockade of the Ukrainian border amounted to $500 million in lost imports and $160 million in exports in its first month, the National Bank of Ukraine said on May 14.

Moreover, the draft law #10168-2 includes several provisions regarding controlled foreign corporations. In particular, the draft law cancels fines for failure to submit reports on controlled foreign companies (CFCs) until the end of martial law, and allows for the reporting on transfer pricing prepared according to the legislation of the country of registration of the CFC, and specifying the norm on the interest expenses of the CFC.

Lawmakers submitted draft laws on establishing a bank of development.

Head of the Tax Committee Danylo Hetmantsev and a group of lawmakers submitted draft laws #11238 and #11239 on establishing the National Development Agency. According to supplementary documents, the National Development Agency is aimed to be a state specialized institution with a special mandate for the recovery and structural transformation of the economy, which will implement lending programs for the recovery of the country. Authors of the draft laws explain that the National Development Agency is designed as an analogue of the German KfW.

The Parliament dismissed two ministers, there are no successors yet.

Last week the Verkhovna Rada supported the dismissal of Mykola Solskii, the Agrarian Policy minister. As we reported in Issue 54, Solskii submitted a resignation letter as National Anti-Corruption Bureau of Ukraine (NABU) suspects him of illegally taking possession of state land in 2017-2018 before his political career.

Moreover, the Parliament supported the dismissal of Oleksandr Kubrakov, deputy prime minister and infrastructure minister. Despite the common practice of submitting resignation letters, the initiative to dismiss Kubrakov was submitted by the head of the Servant of the People faction David Arackhamiia and a group of lawmakers.

Candidates for vacant positions have not yet been presented, so the Parliament has not yet voted on the appointment of successors.

Government appoints acting ministers of agriculture, infrastructure
The Ukrainian government has appointed on May 14 Taras Vysotskyi and Vasyl Shkurakov as the acting agriculture and infrastructure ministers, respectively, Taras Melnychuk, the government’s representative in parliament, said.
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