Ukraine and the World Bank

Ukraine joined the world bank in 1992, and over the 25 years since, the World Bank has committed $10 billion to over 70 projects in Ukraine.[1] Ukraine is in a constituency with Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania, and the executive director of the constituency is Frank Heemskerk from the Netherlands.[2]

Ukraine Economy

Dating back to its constituency in the Soviet Union, the Ukraine served as a crucial economic component in its membership, providing more than one-fourth of the agricultural output for the Soviet Union.[3] Since their independence in 1991, Ukraine began implementing reforms which liberalized prices and established a framework for widespread privatization. However, in part owing to controversy regarding the implementation of these reforms, the country has experienced a critical decline in its economic stability at numerous intervals, noting a 40% decline in economic output in 1999, compared to prior output in 1991.[3] In 2009, the country experienced a 15% economic contraction, adding onto a plethora of additional economic challenges, including zero GDP growth in 2013, and an economic shrink of 6.8% in 2014.[4] As of now, the Ukrainian government has said it needs $35bn (£21bn) to pay its bills over the next two years.[5] At the urgency of outside institutions, such as the World Bank and the IMF, Ukraine has begun to implement particular economic reforms, in the hopes of producing more buoyant economic activity.

History

After the collapse of the Soviet Union, Ukraine obtains its independence in 1991, and on September 3, 1992, Ukraine joins the World Bank.[6] Ukraine's aspirations to social and economic reforms, with help from the World Bank, were always delayed due to difficulties in implementation of reforms because of corruption and poor governance. The lack of capacity to decently implement policies due to corruption made it difficult for the World Bank to initially begin projects in Ukraine.[7]

Ukrainian Crisis

In addition to constant economic unrest, the Ukraine underwent a revolution, which resulted in the ousting of Victor Yanukovych, the then-president of the country.[8] Furthermore, the nation experienced further economic turmoil and crises as a result of the ensuing annexation of Crimea by Russia.[8] In total, military conflict, as well as outside external economic factors contributed to an approximate 17% GDP decline, inflation at 60%, and a depletion of foreign reserves.[7] Furthermore, considering the loss of Ukraine's industry in Donbass as a result of the aggression, the Ukraine experienced an economic contraction of 6.6% in 2014 and by 9.8% in 2015.[7]

World Bank in Ukraine

Plans and Agreements

Ukraine first joined the World Bank in 1992 and currently holds 0.77% of equities as a member in the World Bank.[9] In total, the Ukraine has received approximately $7.4 from 50 loans from the World Bank, totaling an allocation of $10.1 billion.[9] Furthermore, the World Bank also decided to provide additional assistance to Ukraine, totaling in the amount of $3 billion in March 2014. Currently, the World Bank and Ukraine, together, are realizing a total of 12 projects, aimed to improve infrastructure, road and traffic safety, power transmission, urban infrastructure development, and energy efficiency.[9] Specifically, there are currently eight IBRD investments in place in the Ukraine.[10] The World Bank has placed particular attention to promote programs related to good governance and transparency in the Ukraine, as well as accountability in the public sector, and stability in the banking sector. Furthermore, the World Bank aims to reduce the cost of doing business, as well as promote more efficient methods of using public resources to provide critical public services. Current projects in Ukraine have also provided a focus on improving basic public services, which include water and sanitation, health, and social protection. In addition, the World Bank continues to promote the development of public infrastructure such as the power transmission networks and roads. The implementation of these institutional and structural reforms aim to provide impacting economic development of Ukraine.

Country Partnership Framework

The Country Partnership Framework for Ukraine aligns the goals necessary for the country's economic development.[11] The development strategy includes goals aiming to provide fiscal consolidation, a moving flexible exchange rate, reforming energy tariffs, as well as enhancing transparency of public procurement.[11] in 2014, the World Bank aligned $5.5 billion in two series development policy loans,[10] with seven new investment options aimed to bolster the private sector. The World Bank has also provided support for four budget support operations, (MSDPL-1, MSDPL-2, FSDP -1, FSDPL-2), aimed at good governance, accountability in the public sector, stability in the banking sector, reduction in the cost of doing business, and the provision of an efficient use of scarce public resources.[10]

Effects

The World Bank's programs have had a notable impact on the economic status of Ukraine. Economic growth picked up to 3.4% in the first half of 2018, as well as positive growth in domestic trade, at about 5.8%. However, growth in manufacturing slowed by 3%, pointing to weaknesses in investor confidence. Household consumption continued to grow rapidly by 5.6% in the first quarter due to higher pensions and wages. The fiscal deficit remained on target at 2.3% of GDP in 2017, however, despite, the on-target fiscal deficit, expenditures were up by 11.7%. The World Bank has noted a higher spending on social programs reaching a total 5.7% of the total GDP. In addition, poverty remains at above pre-crisis levels in 2017.[10] Additionally, unemployment remains at 9.7% from 10.1% in 2017.[10]

Water

World Bank Intervention in Ukraine has long been aimed at the development of Ukraine's infrastructure. Since late 2014 the World Bank has begun multiple projects in Ukraine aimed at improving roads, highways, municipal structures, waste management, and ultimately allowing Ukrainian markets to open up abroad. The cities of Ukraine all face problems with decades-old irrigation system that was inefficient in its use of energy as well as problematic in its dealing with waste.[12] The International Bank for Reconstruction and Development (IBRD) gave Ukraine a $140 million loan, provided in order to assist Ukraine to deal with the decaying pipeline, by replacing the older pumps with new systems that are more efficient in the movement of water and waste. The city of Kolomyia managed to install eight kilometers of new technologically advanced water pipes and sewage disinfection system, and is now the first city in Ukraine to keep the water clean without the use of chlorine.[13] In addition to developing new pipeline the World Bank has also loaned $22.8 million for improvement of water pumps that will allow utility companies access to newer more efficient pumps which allow for deeper drilling for purer water.[14]

Road

Ukraine has many mountain roads, and as such tends to have many car accidents due to most drivers not being aware of how to drive on Ukraine's long mountain roads. Ukraine makes a great deal of capital from tourists who come to see the natural scenery from the mountains of Ukraine. The World Bank has begun projects to improve the safety of these mountain roads that are the location of many accidents. Ukraine has recently managed to widen roads, and install emergency sidetracks on the mountain highways, as well as increased warning signs to signal drivers to drive more cautiously along the mountains.[15] According to the World Bank, the improvements of the roads of Ukraine will not only diminish the number of accidents, but also allow for easier transportation of goods throughout the country allowing the Ukrainian economy to grow.[15] There has been a great deal of demand for the improvement of roads from private businesses to allow for the transportation of goods, the World Bank's involvement in safety improvement has also been an answer to the demands of many private businesses, particularity farmers who previously were limited in their capacity to transport goods. The growth of roads allows for an increase of trade within Ukraine, and opens doors to exporters to gain access to trade abroad as well.[16]

World Bank analysis indicated that the improvement of roads allows for the economic development within Ukraine, however, in order to further stimulate growth, the World Bank has worked directly with Ukrainian banks in order to provide long-term loans that will allow companies in Ukraine to begin exporting abroad. The World Bank has invested in Ukrainian exporters via the International Finance Corporation (IFC) to work with Ukreximbank, which is the trade bank of Ukraine in order to help Ukrainian exporters recover from the recession.[17] The growth of the economy and benefits to exporters gave the World Bank incentive to further improve transport connectivity, road safety, and improve road network management in Ukraine, in order to allow for the growth of exporters throughout the country. However, the conflict in Crimea and Eastern Ukraine has resulted in the prevention of the completion of this project, as well as changes in planning [18]

Predictions

Currently, the World Bank predicts additional turbulence in emerging markets, and instability owing to influence brought about by political disagreements within the country regarding the implementation of reforms. In order to meet a projected growth of 3.3% in 2018 and 3.5.% in 2019, Ukraine needs to meet agreements and requirements from international organizations such as the World Bank and the IMF. However, Ukraine faces major financing needs in the coming years, that requires the mobilization of sizable international financing in order to meet the fiscal deficit target of 2.5% of GDP.[10] By contrast, if Ukraine does not reform, predictions point to macroeconomic vulnerabilities intensifying, as well as financing difficulties forcing a compression in domestic demand.[5]

References

  1. ^ "World Bank Portfolio".
  2. ^ "EDS19 Home".
  3. ^ a b "Europe :: Ukraine — The World Factbook - Central Intelligence Agency". www.cia.gov. Retrieved 2018-12-14.
  4. ^ "Ukraine | Data". data.worldbank.org. Retrieved 2018-12-14.
  5. ^ a b "Ukraine's economy: How bad is the mess?". BBC News. 2014-05-01. Retrieved 2018-12-14.
  6. ^ "Member Countries".
  7. ^ a b c "International Bank for Reconstruction and Development: Ukraine" (PDF).
  8. ^ a b Lenč, Marek (2016-12-20). "Ukraine in Crisis: The Economic and Security Consequences for European Union, Ukraine and Russia". Rochester, NY. SSRN 2905707. Cite journal requires |journal=
  9. ^ a b c "Ministry of Foreign Affairs Ukraine".
  10. ^ a b c d e f "Overview". World Bank. Retrieved 2018-12-14.
  11. ^ a b documents.worldbank.org (PDF) http://documents.worldbank.org/curated/en/847421498183265026/pdf/Ukraine-Country-Partnership-Framework-FY2017-21-05262017.pdf. Retrieved 2018-12-14. Missing or empty |title=
  12. ^ "Modernizing Municipal Infrastructure in Ukraine".
  13. ^ "Ukraine: Making Ukrainian Cities More Livable".
  14. ^ "In Ukraine: Fixing an Old City's Old Water System".
  15. ^ a b "Ukraine: Making Roads Safer".
  16. ^ "Improving the condition of the M-03 highway and increasing road safety in Ukraine".
  17. ^ "Helping Ukrainian Exporters Find New Markets Abroad".
  18. ^ "Road Sector Development Project".

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