Ukraine: Corruption risks soar as Western influence subsides
Ukraine is a large, fertile and populous country, of the kind that tends to attract foreign investment. Scratching beneath the surface, however, suggests that corruption, far from being cured by the country's revolution of four years ago, is imperilling political stability and poses a serious risk to business operations
New bossPresident Petro Poroshenko was the chief beneficiary of Ukraine's Euromaidan revolution of 2014. According to the Western narrative of events, in that year a grassroots movement of liberal protesters used peaceful means to force from office Viktor Yanukovych, labelled the worlds most corrupt leader by London-based NGO Transparency International, bringing about a shift to liberal democracy. In response, Russia annexed Crimea and supported insurgents in eastern Ukraine, in the process shooting down a Malaysian airliner that, in theory, had every right to overfly an active warzone in which anti-aircraft munitions were in constant use. A more cynical analysis would be that the democratically elected Yanukovychs great mistake was not corruption but rather his decision to sign an association agreement with Russia, rather than with the European Union. This is what triggered the Euromaidan protests, named after the square on which they began. Thousands of young pro-E.U. demonstrators camped in Kievs main square through the harsh winter until the government fled, in what many supporters of the former government view as a movement orchestrated by the CIA and other Western intelligence agencies. With the dust having now settled on the civil war, which crippled Ukraines economy, Western investors are being encouraged to return. By some measures, Ukraine has seen significant successes in the years since; the budget deficit remains below 3 per cent of GDP while gold and foreign currency reserves have recovered to USD18 billion, equal to four months of imports. Politically too, the government has made headway in securing major changes to the healthcare system, cutting long-term costs. Yet Ukraines economic progress has stalled. In 2007, GDP per capita was 160 per cent larger than neighbouring Moldova. Now it is only 8 per cent larger, and Ukraine is the second-poorest country in Europe after its western neighbour. Moreover, the governments refusal to adhere to IMF conditions particularly as regards corruption and privatisation has jeopardised a crucial economic lifeline.
Ukraine is one of the largest borrowers in the IMF. In March 2015, the U.S.-based fund approved a USD17.5 billion rescue package for Ukraine, which at that time was in the midst of its destructive civil conflict. The IMF demanded strict conditions for the release of the funds, which were due to be transferred over a four-year period. These included large-scale privatisation and the creation of an anti-corruption court. However, the IMF has been unimpressed by Ukraines efforts thus far, and it held back a tranche of the funds in 2017. In order to unlock the rest of the loan, the IMF demanded that Ukraine legalise the private sales of agricultural land, adopt a law on privatisation, make major changes to pensions, adjust gas prices to market standards, and most importantly, set up an anti-corruption court compliant with the lenders standards. In January 2018, the Ukrainian government passed a privatisation law, but has done little to tackle the other key points.