WASHINGTON, February 16, 2012 - The World Bank’s Board of Executive Directors today discussed a new Country Partnership Strategy (CPS) for Ukraine covering the period of 2012-2016. The Strategy proposes an investment lending program in the range of US$ 500 million per annum. The International Finance Corporation (IFC) is expected to lend additional funds of up to US$ 400 million annually. The CPS also includes analytical and advisory services, and technical assistance.
“The CPS will support the President’s Economic Reform Program for 2010-2014,” said Qimiao Fan, Country Director for Ukraine, Belarus, and Moldova. “This Program sets an ambitious reform agenda to improve Ukraine’s global competitiveness and meet the expectations of the Ukrainian people. The new strategy aims to assist Ukraine in overcoming implementation bottlenecks that have affected successive reform programs in the past, by strengthening institutions, improving public governance, and supporting a more participatory reform process.”
The new strategy builds on 20 years of co-operation between Ukraine and the World Bank. Since Ukraine’s independence, progress in economic and social reforms has lagged behind targets and social aspirations. The World Bank Group will assist the government to overcome constraints that prevent the country from reaching its full economic potential. The new CPS aims to demonstrate how open public dialogue in reform formulation, accountability in implementation of policies, and transparency in the monitoring of their impact can yield better development results.
The World Bank Group’s assistance will be concentrated in two areas:
- Improving public services and public finances: The Bank’s efforts in this area will be targeted at achieving improvements in: (i) responsible and sustainable fiscal management; (ii) efficiency of service delivery in health and education and better targeted social assistance spending; and (iii) provision of municipal services (water, sanitation, heating). The World Bank Group will finance investments in public sector infrastructure, work on setting up improved monitoring mechanisms and strengthening governance of public service providers, while supporting intensified dialogue between the government and civil society in key policy areas such as health care reform, water supply, district heating, and public procurement.
- Improving the business climate to unlock Ukraine’s economic potential: The new CPS focuses on (i) improving the business environment, for both domestic and foreign investors; (ii) improving physical infrastructure to reduce the cost of doing business; and (iii) creating an appropriate policy framework and attracting private investment in agriculture to allow Ukraine to benefit from high international demand for food and agricultural commodities.
Improvement in the implementation of the existing portfolio will be critical to achieving these strategic outcomes. The current investment lending portfolio includes 11 operations for a total amount of US$ 1.8 billion of which 67 percent is undisbursed. Efforts will continue to accelerate disbursements and ensure quality outcomes from existing investments financed by the World Bank Group.
The Bank program will build on strong analytical work, with a focus on consultation and consensus building by working closely with a variety of government and non-government stakeholders at both the central and municipal level. Advisory services will target key policy areas such as fiscal, tax, and public financial management; agriculture, land, and business regulations, public enterprise governance; the financial sector, energy efficiency, and governance; and social reforms.
IFC will contribute to the CPS outcomes through combined investment and advisory operations for the development of the private sector. IFC strategy in Ukraine will continue to support the development of financial markets, agribusiness, and infrastructure. IFC will also focus on two cross-cutting priorities of improving business environment and promoting energy efficiency.
Given implementation risks and lessons learned during the previous CPS, the Bank proposes a calibrated approach to financial assistance. Financing and the range of instruments could increase when reforms accelerate and governance improves, but financing would be kept modest if reforms stall. The Strategy leaves scope for an upward revision of lending amounts through the addition of policy loans which would support reform efforts. “The authorities have committed themselves to addressing some of the most prominent governance concerns,” said Mr. Fan. “The government and the Bank will jointly evaluate progress in these areas to determine possible policy lending.”
Since Ukraine joined the World Bank in 1992, commitments to the country total over US$ 7 billion for 39 operations. IFC committed a total of US$ 1.657 billion in 63 projects and raised an additional US$ 632 million through syndications. The Multilateral Investment Guarantee Agency (MIGA) has supported 15 projects in Ukraine. In 2011, MIGA’s outstanding gross exposure in Ukraine stood at US$ 999.1 million, making it the country with the largest outstanding exposure in MIGA’s portfolio.
