Ukraine wants a new, longer-term International Monetary Fund (IMF) program with an emphasis on attracting foreign investment, selling state-owned assets, and lifting the ban on the sale of farmland.
Oleksiy Honcharuk, who leads Ukrainian President Volodymyr Zelenskiy’s economic team, told Bloomberg in an interview published on July 30 that he wants to pursue market-based policies.
To help do that, Honcharuk, 35, said he wants to replace the current 14-month, $3.9 billion IMF program that expires at the end of this year.
Instead he wants a staff-level agreement for up to four years as early as September.
"When we show changes in the approach to privatization, farmland sales, when we attract a couple of big companies to extract natural resources -- all of these examples will give clear signals that the rules have changed," Honcharuk said.
Economic Growth Target
Kyiv currently is targeting yearly economic growth of 5 percent, an improvement on the past three years when the economy increased on average by 2-3 percent.
To unlock growth, creating a farmland market by lifting the moratorium could add $15 billion a year to economic output and increase yearly gross domestic product by about 1.5 percentage points, according to the World Bank.
Honcharuk said talks are underway with the World Bank on whether to allow foreigners to purchase farmland or limit the size of sales. Ukraine has more than 40 million hectares of fertile farmland that covers nearly 70 percent of its territory.
"We’re looking for the least painful but most efficient version," Honcharuk told Bloomberg.
Corruption One Of Main Obstacles
There is a catalogue of more than 200 state-owned companies that the State Property Fund is ready to sell.
However, "corruption is one of the main obstacles to carrying out long-awaited reforms of state-owned enterprises," according to a report by the Organization for Economic Cooperation and Development (OECD).
Still, Honcharuk said minority stakes could be offered to large state-run enterprises, such as the national railway company and postal service.
Other challenges remain, such as a Kremlin-backed separatist conflict in two regions of easternmost Ukraine and a shrinking workforce.
In its July macroeconomic report, the Ukrainian Finance Ministry said that nearly 18 percent of the "economically active population age 15-70" are labor migrants. More than 3.2 million people are working abroad.
However, labor migration is driving wage growth because competition is fiercer between companies to hire the remaining talent, the Finance Ministry said.