Pension reform, electronic declarations, privatization: What Ukraine promised to IMF

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14:38, 5 October 2016

Pension reform, electronic declarations, privatization: What Ukraine promised to IMF

Author :

IMF expects from Ukraine successful fight against corruption, expanding privatization list and settlement of agricultural land market

14:38, 5 October 2016

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The International Monetary Fund has already released the text of its memorandum with Ukraine, containing a plan of action necessary for the further successful cooperation. There are prescribed the specific steps for Ukraine in order to get the fourth tranche.

Implementing the new Memorandum will allow up to the end of 2016 to attract an additional 1.3 billion USD of financial support from the IMF, which will go to the reserves of the NBU.

We have collected the main points of the document to help understand what the IMF wants from Ukraine and how it will affect the ordinary people.

Electronic declaration

Ukraine undertakes in accordance with the International Monetary Fund statement to put the high-ranking officials before necessity to the end of October to submit electronic declarations of income for 2015.

"All the high-ranking officials are required to submit electronic declarations of income and assets for 2015 within 60 days since the launch of the electronic declaration system", - stated in it.

The full system of e-declaration started working on September 1, therefore, officials must fill their declarations the end of October. And those who have submitted their declarations, while the system worked in test mode (from August 15 to September 1), should submit those documents once more.

Related: Nalyvaychenko unveiled terms on which IMF provided new tranche for Ukraine

Health care reform

Prior to the beginning of 2017 Verkhovna Rada needs to adopt a package of health reform laws.

The reforms will be aimed at decentralization, increasing of managerial autonomy for hospitals, as well as the transition from funding based on the number of hospital beds to the financing of health services provided.

In September this year Cabinet abolished the Soviet Order of hospital beds, according to the number of which funds were allocated for the hospitals. Now, medical institutions should determine their own funding, depending on the actual workload. In theory, such a system allows hospitals to spend money that used to be "tied" to the quantity of beds (often unoccupied) on medicines, equipment and other basic needs.

Elimination of the tax police

Instead the tax police the new civil service that will investigate the financial and economic crimes against the state must be formed at the Ministry of Finance by November this year.

By the end of September 2016 it had to be decided by the tax authorities on a merger into a single entity, and Parliament must allow such association for the customs authorities.

Until the end of October Kyiv is planning to adopt legislative changes that provide State Fiscal Service the right to use indirect methods of evaluation to determine the correctness of the obligations of each taxpayer's tax and social insurance. Speaking simply, income will be determined, based on the taxpayer's expense. This practice is applied in many countries.

Related: IMF demands to launch market of agricultural land in Ukraine. Is it good idea?

Pension reform

The memorandum stipulates that pension reform is the "cornerstone" of the program of structural changes for Ukraine.

Ukraine agrees before the end of 2016 to adopt a law on the gradual change in the retirement age, reduce the opportunities for early retirement, to tighten the eligibility criteria for the minimum pension.

Ukraine pledged to consolidate the pension legislation, which currently consists of 12 laws, and ensure a single principle of pension without privilege for any profession (except the military), as well as to broaden the base of contributions to the social security system.

The sale of shares of state banks

Ukraine in 2018 will start to sell at least 20% of the shares in the two largest state banks - "Oschadbank" and "Ukreximbank" - to international financial institutions. In the same period, Kyiv intends to remove a full guarantee on deposits in “Oschadbank".

In addition, the government plans to sell its stake in the other three state-owned banks by the end of 2017.

Retention of gas price on not lower level than import price

Ukraine should introduce a mechanism to allow on a quarterly basis to adjust the tariffs for gas to keep them at the level of the import price. The idea is that gas prices will not fall below the so-called economically justified - that is, the import price plus premium.

The document also stated that such a mechanism should be launched no later than April 2017 and be in force until the full liberalization of gas prices.

Related: IMF transferred its third tranche for Ukraine

Monetization of subsidies

Ukraine has committed itself to the end of March 2017 to monetize housing subsidies and benefits.

"We will monetize subsidies by the end of March 2017 so that private gas traders would be able to compete with the" Naftogaz "in the supply of gas to the population and create incentives for energy conservation," - the document says.

In addition, the Cabinet has pledged to separate the charges for transportation and distribution of gas from the price of gas as a commodity from the set gas price for Ukrainian population.

Related: "Kremlin lost" - Poroshenko's statement after Ukraine for IMF tranche

Related: Russia to vote against next IMF tranche for Ukraine, - Anton Siluanov

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