Ukraine

Ukraine is in a recession because of weak external demand and delays in policy adjustment. Growth in 2013 is projected to remain weak and will continue to be vulnerable... Show More + to external shocks. Along with macroeconomic adjustment, structural reforms are needed to jumpstart growth. Show Less -

Executive Directors approved the loan to Ukraine for the Second Road and Safety Improvement Project in the amount of US$ 450 million on the payment terms and conditions... Show More + set out in the President's Memorandum. Directors expressed support for the project, noting its consistence with the FY 12-16 country partnership strategy (CPS) objectives and priorities. Directors also noted the harmonization of the Bank's involvement in Ukraine's road sector toward building economic and financial sustainability and improving road safety. Directors stressed the importance of sustaining sufficient financing for maintenance of the road sector. In this regard, Directors underscored the need for an increased role of the private sector. Directors welcomed the incorporation of an updated Governance and Anti-Corruption Plan. Beyond the project, Directors encouraged close collaboration and cooperation with the International Monetary Fund (IMF). Show Less -

The energy strategy of the Government of Ukraine calls for a quadrupling of renewable energy by 2030. It is estimated that this target can be met primarily through biomass,... Show More + with smaller contributions from solar, wind and small hydro. The Ukraine Sustainable Energy Lending Facility (USELF) started in 2008 as part of the European Bank for Reconstruction and Development (EBRD’s) on-going assistance to the Ukraine. USELF aims to provide development support and debt finance to renewable energy projects which meet required commercial, technical and environmental standards. USELF not only provides tailor-made financing, but also provides technical assistance for businesses and local authorities based on information gathered and analyzed by consultants to promote projects that are often challenging to finance and implement. Show Less -

Improvements to the Public Financial Management (PFM) systems in Ukraine, introduced over the last decade, have contributed to improved fiscal management at an aggregate... Show More + level and helped Ukraine to maintain budget discipline during a period of serious economic and political disturbance in 2008-9. A well established and transparent budget process, a strong centralized Treasury system and improved tax collection provided the foundations for this relatively good performance. Ukraine has a well established budget process that allows for orderly consultations with line ministries and with the legislature. Political events that took place during the period under review resulted in a significant delay in legislative approval of the budget in 2010 that accounts for the lower score compared to 2005. In 2011 budget preparation is back on track. The 2010 budget code which came into effect in the current financial year promises some further strengthening of the links between policy and the budget. Previously government prepared medium term fiscal forecasts, but these did not translate into medium term allocations for programs or ministries and so had little influence on annual budgets. The 2010 Budget Code brings about important improvements, with the introduction of sector expenditure ceilings and a medium term perspective for long term public investment programs. The 2011 Public Expenditure and Financial Accountability (PEFA) assessment is intended to assess changes in PFM system performance between FY 2005 and FY 2010, and to inform the future direction of Government's public finance management reform program. More specifically, this report: (i) provides an updated overview of PFM performance using the PEFA performance measurement framework; (ii) establishes and explains changes in performance compared to the results found during the previous assessment; (iii) reviews Ukraine's PFM performance relative to other counties and related benchmarks; and (iv) assesses the impact of the findings and their implications for the ongoing reform program of the Government. Show Less -

Ukrainians do not move often, and when they do move, they don't necessarily go to areas with good jobs and high wages. Internal mobility is about half of what is expected... Show More + when comparing Ukraine with other countries. The lack of mobility is remarkable, given the availability of more jobs and better wages in several Ukrainian cities. Too few people are taking advantage of economic opportunities, and as a result, Ukraine's structural transformation has stalled. This is a sharp contrast to many other countries in Eastern Europe, where the transition to a market economy has been accompanied by a shift from widely-dispersed industries to a concentration of capital and production in a few areas, and from low- to higher-productivity sectors. Labor has largely mirrored the movement of capital and production. In Ukraine, however, labor is not flowing as smoothly to areas of high production. This report examines the mobility of workers inside Ukraine and their willingness to physically relocate from one area or region to another in search of better economic opportunities. The report explores the patterns and trends of labor mobility in Ukraine as well as the drivers and constraints of that mobility, and derives policy implications from its findings. Second chapter of this volume offers evidence of how a mobile workforce benefits the economy. It shows how the economic transition in most of Eastern Europe has been accompanied by the significant concentration of capital and people in a few areas. This has not happened to the same extent in Ukraine. Third chapter shows that what little migration we see in Ukraine is not necessarily going to the leading regions. For internal migration to lead to growth and better living standards, workers have to move to the areas of the country where productivity and therefore, wages are high, and where unemployment is low. Third chapter more over examines the factors that prevent Ukrainians from moving. Fourth chapter offers recommendations for creating greater labor mobility in Ukraine. It explains how addressing the institutional bottlenecks that affect internal mobility will allow more people, especially the poor, to access better jobs, accelerating growth and enabling living standards to rise. Show Less -

The objectives of the Second Roads and Safety Improvement Project are an improved condition and quality of sections of the M-03 road Kyiv-Kharkiv-Dovzhanskyi and increased... Show More + traffic safety on roads in Ukraine. This is to be achieved through rehabilitating and upgrading various sections totaling about 108 km of the road in the Poltava oblast; and implementing various types of physical road safety measures on some dangerous road sections on Ukraine's network of main roads, using a 'corridor approach'. The project will have moderate environmental impacts during construction and operation periods. With appropriate mitigation, particularly during the construction phase of the project, none of the impacts referred to in this report will be significant. Show Less -

This paper brings new evidence on the impact of services liberalization on the performance of manufacturing firms. Using a unique database of Ukrainian firms in 2001-2007,... Show More + the authors utilize an external push for liberalization in the services sector as a source of exogenous variation to identify the impact of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization is associated with a 9 percent increase in TFP. Allowing services liberalization to dynamically influence TFP through the investment channel leads to an even larger effect. The effect is robust to different estimation methods and to different sub-samples of the data. In particular, it is more pronounced for domestic and small firms. Show Less -

The Ukraine Investment Climate (IC) project and the Sustainable Business Advisory (SBA) food safety project in Ukraine formed a partnership-one that has led to tangible... Show More + results in the form of burdensome regulations being abolished and businesses receiving advice on safety standards that will help them become more competitive in European Union (EU) markets. IC-SBA advice has helped facilitate International Finance Corporation (IFC) investments in Ukraine and helped set triggers for World Bank lending. It has also defined the future of the work being done by these two business lines in the agribusiness sector. This smart lesson relates lessons and experiences of the teams in designing and implementing such an innovative and holistic technical assistance solution, within a specific sector, for government and private sector clients. Show Less -

Ukraine has extensive public infrastructure inherited from the Soviet times but much of it has fallen into disrepair over the past decades and needs major rehabilitation... Show More + or replacement so that growth may continue. Creating fiscal space for investing more is one of the critical tasks that facing the country, but a constrained fiscal space together with the use of investments as a stimulus for growth call for more efficiency in public investment management practices. There are a number of fundamental issues that need to be addressed if Ukraine is to make progress in its reform ambitions for public investment management (PIM). The most significant are: (1) most projects avoid scrutiny due to loopholes in classification (lack of definition of a public investment project); (2) there is no effective economic appraisal and appraisal review procedures in place due to limited human resource (HR) capacity, and no common technical standards; (3) the PIM system does not seem to block new projects from entering the budget but allows ministries to delay ongoing ones and squeeze in new ones; and (4) lack of strategic guidance with which to prioritize complicates project selection. One of the fundamental building blocks of a sound PIM system is a clear, legal definition of what counts as a public investment project and what does not. It should be pointed out that this already high discrepancy is only a comparative measure of input values. Developing projects that are output and performance driven should yield even greater efficiencies. Between 2000 and 2008, Ukraine was an average growth performer in a fast growing region, with gross domestic product (GDP) growth averaging 7 percent. As the global financial crisis hit the Ukrainian economy it contracted by 15 percent in 2009, exposing its underlying macroeconomic and structural vulnerabilities. As a result of the insufficient structural transformation and impact of the economic crisis, Ukraine now faces substantial fiscal pressures that threaten economic stability and growth. The Government of Ukraine recognized the need for a modern public financial management (PFM) system and put considerable emphasis on several aspects of PFM reforms. Training for the development of capacity in the PIM system is tricky in Ukraine. It is becoming clear that due to the dynamic nature of the Ukrainian civil service, officials are rapidly moving from one area of the Administration to another. Show Less -

Using a rich data set of almost the entire population of Ukrainian secondary schools, the authors estimate the effect of school size and class size on the performance... Show More + of secondary schools on Ukraine's External Independent Test. They find that larger schools tend to have somewhat better performance, both in terms of test scores and in terms of test participation. The size of this effect is relatively small, however, especially in rural areas for which the estimates are likely to be more clean estimates. Class size is found to be insignificant in most specifications and, if significant, of negligible size. Show Less -