List of 19 structural benchmarks in IMF EFF includes 10 fiscal, 4 anti-corruption ones

KYIV. March 31 (Interfax-Ukraine) – The four-year $15.6 billion EFF Extended Fund Facility for Ukraine, approved by the International Monetary Fund (IMF), currently contains 19 structural benchmarks – the most important performance criteria for the period until the end of June 2024, more than half of which are in in the fiscal sphere and almost a quarter in the area of improving governance and fighting corruption.

According to the Memorandum of Economic and Financial Policies, published on the website of the Fund, the nearest fiscal structural benchmarks are the entry into force by the end of April of the already adopted by the Rada of the updated law on the state budget with increased spending by UAH 537 billion.

By the end of May, it will be necessary to submit two bills to the Rada with a tightening of the provisions of the Budget Code to minimize ad hoc changes to the budget and the restoration of the norm on the limit of government guarantees with a clear and transparent justification for them. The program also contains a quantitative criterion for the continuous ceiling on publicly guaranteed debt – UAH 20 billion at the end of April and UAH 37 billion at the end of 2023.

By the same date, the end of May, it is necessary to adopt amendments to the Budget Code and the relevant regulatory framework to enhance the transparency and accountability of donations that are accumulated on the special accounts of the National Bank, and consolidate them in the special fund of the state budget.

The next benchmark is the adoption by the end of June of bill No. 8401 on the abolition of the single tax of 2% from July 1 and other benefits for entrepreneurs and the resumption of tax audits. The Cabinet of Ministers submitted it to the Rada on January 31, fulfilling the condition of the previous Program Monitoring with Board Involvement (PMB) with the IMF.

By the end of September, the Medium Term Debt Management Strategy will need to be updated and published to align it with the program objectives, and to present in the 2024 budget declaration projections for major revenue and spending categories and sources of deficit financing for 2025- 2026, as well as a fiscal risks statement. It should contain details on state-owned enterprises in the field of energy and critical infrastructure.

Finally, before the end of this year, the National Revenue Strategy should be adopted and the current Public Investment Management (PIM) procedures should be reviewed. The government is committed to developing a roadmap of measures by this date so that all public investment projects follow unified PIM approaches, including PPP, investment projects are selected on a competitive basis, with transparent selection criteria, and the Ministry of Finance is vested with stronger powers, including a clear gatekeeping role during the different stages of the investment project cycle.

In terms of improving governance and combating corruption, the next of the four benchmarks with a deadline at the end of July is the adoption of a law to restore asset declaration of public officials not directly involved in the mobilization and war efforts and reinstating the NACP’s function to examine and verify them.

By the end of September, amendments to the law on financial monitoring and combating money laundering should be made in order to re-establish enhanced due diligence measures on politically exposed persons (PEP) consistent with the risk-based approach consistent with the FATF standards. (Last year it was reduced from life imprisonment to three years).

Then, by the end of October, the asset declaration system should be simplified through linking with other databases and registers consistent with the public officials’ legal obligations to make truthful and timely submissions, legislation should be adopted to enhance the institutional autonomy of the Ukraine’s Special Anti-corruption Prosecutor’s Office, specifically, on the selection procedures, capacity to regulate organizational activities, and mechanisms for discipline and accountability.

In terms of state corporate governance, the task is to transfer shareholding of the Gas Transportation System Operator of Ukraine (OGTSU) from the Main Gas Pipelines of Ukraine (MGU) directly to the Ministry of Energy by the end of July by the end of July with the adoption of the new charter.

The remaining five structural benchmarks relate to the National Bank and the financial and banking system. In particular, by the end of June it is planned to prepare a conditions-based strategy to move to a more flexible exchange rate, ease FX controls and transition to inflation targeting.

By the end of September, it is necessary to strengthen bank governance and oversight by: separating the related-parties-unit from banking supervision; implementing “supervisory panels” as a consulting body to the Supervisory Committee; and resume scheduled inspections for both banking and non-banking institutions, while ensuring NBU discretion on matters related to staff safety.

Finally, by the end of March 2024, it is planned to prepare a bank rehabilitation framework in consultation with the DGF and IMF staff, and by the end of June 2024, to implement a supervisory risk assessment methodology to inform supervisory engagement priorities.

The approved program envisages the provision to Ukraine in 2023-2024 of: SDR 2.012 billion ($2.706 billion) now, SDR 664 million ($893 million) in mid-June and October of this year and the end of February next, and then SDR 1.670 billion ($2.246 billion) in mid-June 2024 and at SDR 835 million ($1.123 billion) in early September and December 2024.