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Oksana Markarova

Acting Minister of Finance

In June, Oksana Markarova was appointed Ukraine’s acting minister of finance. Previously the first deputy finance minister, she played a crucial role in the ministry during the country’s strong economic recovery since 2015 and is now tasked with leading the country through its next round of financial reforms. Here, she explains how the ministry is working to secure macroeconomic stability, effective budgeting and economic growth and highlights the wide array of investment opportunities that Ukraine has on offer

What are your top priorities as acting finance minister?

We have three key priorities at the Ministry of Finance. First of all, effective budgeting, which entails applying the 2018 budget, preparing the draft budget for 2019 and implementing a regular spending review for the state. Secondly, maintaining macroeconomic stability and the reduction of fiscal risks. Primarily, this task involves fiscal consolidation for the further reduction of the budget deficit, the completion of public debt assessment and management reform.

Lastly, we are focusing on fostering economic growth. This, we hope to achieve through the continuation of customs administration reforms and involving Ukrainian business in public investments and international infrastructure projects. Likewise, we will be introducing corporate management and aim to attract investors to state-owned banks. Attracting foreign investors is also seen as important for growth and we are considering possibilities to reduce tax pressure on diligent businesses. Throughout everything, the ministry will pay particular attention to transparency, openness, and verification in order to make public finances available and open to all those interested.

After years of recession, the economy is expanding again and there is potential for 3 percent growth this year. How do you plan to cement and stimulate this growth?

According to our forecast, the total GDP growth in three years will be equal to more than 11 percent. Inflation will be going down as well – from 9 percent in 2018 to 5 percent in 2021. This is all the result of the serious structural reforms that we have been pursuing for the last three years despite the challenging environment. One more important result of these reforms is the presence of Ukraine on the international capital market. It means that investors trust Ukraine and are ready to invest.

“According to our forecast, the total GDP growth in three years will be equal to more than 11 percent”

In terms of Ukraine’s finances, how would you evaluate the progress from 2014 to today?

In 2014, GDP fell by 20 percent, inflation hit 24.9 percent and eventually reached a peak of 43.3 percent in 2015. At the same time, the budget deficit increased to 4.9 percent, our currency rapidly depreciated and the National Bank’s currency and gold reserves decreased by almost three times – falling to $5.5 billion at the beginning of 2015. We also lost Russia as a trading partner. Today, after macroeconomic recovery and fiscal consolidation, our growth reached 3 percent. Our inflation has also decreased, our budget deficit has fallen to 1.6 percent, our international reserves have increased and the currency has stabilized.

How do you view the fact that the IMF is moving slower than expected within the framework of the EFF (Extended Fund Facility) program?

I think that the main thing in negotiations is the result. For us, now it is clear what tasks we have to work on in order to finish the review of the program. There are three main issues: the anti-corruption court, gas and energy reform, and a balanced budget. Currently, we are actively working on the budget and I am partly involved in the work on reforming the energy market. I hope that we will find understanding on all issues with the IMF.

On June 7, the Verkhovna Rada passed the anti-corruption court law. It was one of the main requirements of the IMF. Currently, the fund is looking at the final version of the bill, and in the near future, we will receive the full confirmation of compliance with the objectives of the program.

We have a commitment to the IMF regarding the market price of the gas. However, the question remains in the definition of the formula. The formula was defined 3 years ago and it needs to be reviewed. After all, the real price 3 years ago is different today.


Ukraine attracted $2.3 billion in FDI last year. How important is FDI for the country’s continued growth and what do you think of this figure?

The amount of FDI in 2016 decreased from 2015 when the country attracted $4.4 billion. However, this year the government has adopted of important initiatives that will certainly help to improve the investment climate in Ukraine, namely the Law on High Anti-corruption Court, the Law on Currency and the progress in the privatization reform. The plan for budget revenues from privatization in 2018 is expected to be UAH 22.5 billion ($844.9 million) and investment advisors for this process will be selected soon. But we should also consider that decreased state spending on unprofitable enterprises and investments, increased tax revenues from privatized plants, new technologies brought by investors, and new jobs created will also have a positive effect on our economy.

We also have a positive trend as our European partners’ interest in investing in the Ukrainian economy increases. The countries which have shown the most interest in Ukraine have been Cyprus ($506 million), the Netherlands ($262.5 million), Great Britain ($211.7 million) and Germany ($119.3 million). Today, it is hard to find a reform or initiative in Ukraine that is realized without the involvement of our international partners and investors. Take the energy efficiency fund for example. On April 21, parliament adopted the law about energy efficient funds, and we signed an agreement with the IFC, the EU and Germany on its establishment. This fund will help to reduce the consumption of expensive gas by the population, complete renovation of buildings and save about $3 billion of energy resources annually. It will utilize funds from the state budget, donor and private investors’ money and work through the monetization of subsidies. The institution will be run by a committee of the Government, donor countries and IFIs. Experts estimate the value of the energy efficiency market in Ukraine is $50 billion. The need to modernize will be crucial for the next 10 years due to market tariffs for energy and utilities introduced in 2015.

“Historically known as the breadbasket of Europe, Ukraine is focused on becoming the food basket of the world"

What are the sectors that offer opportunities for investment?

First of all, we have agribusiness. Historically known as the “breadbasket of Europe”, Ukraine is focused on becoming the “food basket” of the world. With 33 percent of the world’s black-earth soil concentrated in Ukraine, a favorable climate and proximity to key markets, Ukraine is becoming an agricultural export powerhouse. Ukrainian agriculture, already enjoying substantial cost advantages due to attractive land prices, extremely fertile soil, lower wages and competitive logistics, still has plenty of headroom for productivity growth as the yields per hectare remain below Western benchmarks. On top of that, diversified transport systems provide opportunities for the efficient shipment of agricultural production to key markets. Ukraine’s agro and food exports have grown at 13.5 percent over the last decade – in 2007, exports were valued at $6.2 billion and in 2017 that number was up to $17.9 billion. Specific investment opportunities include expanding rail facilities for grain transport as an alternative to expensive shipping by truck; barge shipment infrastructure as a cost-saving alternative to both rail and trucking; and deepwater port facilities to relieve existing ports operating near capacity, especially near Odesa and Mykolaiv.

Recent reforms in the energy sector opened new opportunities for global energy players and small investors in Ukraine. Basically, Ukraine’s energy market has undergone a complete overhaul, creating a wide range of business opportunities along the entire energy value chain from oil and gas exploration to gas and electricity infrastructure, energy management and conservation by metering consumption and building insulation. So far, the impact of the ongoing energy reforms has led to a decrease in gas consumption by 22 percent in 2015-2016. Energy efficiency is also a high-growth sector with estimates of $12.8 billion in annual savings after energy savings technologies are put in place. Furthermore, there are opportunities in the nuclear energy sector in terms of upgrading technology. Ukraine also has a diverse endowment of natural energy resources and continues to be a net exporter of electricity and of coal. Traditionally, Ukraine has a powerful and developed energy sector that includes gas, electricity, hydro, coal and nuclear. Ukraine is the fourth-largest European natural gas resource base and has the continent’s largest underground gas storage capacity.

The IT industry has grown by nearly 30 times over the last decade, from $110 million in 2003 to about $3.6 billion in 2017, achieving an impressive cumulative average growth rate of 30 percent. The country offers a large, skilled and cost-competitive labor base and has become Europe’s number one IT outsourcing and software development powerhouse. IT outsourcing is the first level in the technology and software value chain. However, Ukraine is also rich in successful start-ups. At the same time, over the years, more than 100 global players have located R&D facilities in Ukraine, further driving the high-tech sector.

Ukraine also has a large manufacturing base, which historically has been concentrated in heavy industry including mining, railway rolling stock, machine tools, aircraft engines, as well as light manufacturing and the food industry. This manufacturing capability has enabled Ukraine to become a global competitor in specialized industries such as automotive parts, aerospace and shipbuilding. Starting from the year 2000, more than 20 global automotive companies established production in Ukraine with more than 30 new plants and 40,000 jobs created and rapidly growing auto parts manufacturing clusters are producing components for major global auto manufacturers. As of late, domestic production is also enjoying a market revival in heavy industry trucking, buses, trolley cars, farm tractors and related farm equipment. In terms of aerospace, Ukraine is home to the world-famous Antonov design bureau known for designing the world’s largest airplane, the AN-225 “Mriya.” The country also produces the AN-178 and is an important supplier of turbine engines for aircraft, helicopters and aerospace industries worldwide.

Ukraine is also undergoing something of a renaissance in the creative industries. In recent years, the sector has witnessed an explosion of innovation ranging from such diverse industries including women’s fashion, food technology, racing yacht design and construction. Likewise, Ukraine’s pharmaceutical sector is one of the fastest growing and crisis-resistant consumer industries in the economy, reporting a cumulative average growth rate of 32 percent during from 2014-2016.

Ukraine’s geographic location makes it an important transit corridor for trade and travel between Europe, Asia and the Middle East. When combined with its other comparative advantages, Ukraine has the potential to become an exclusive and potent Eurasian Hub. However, the country is estimated to need $60 billion by 2030 in order to modernize its infrastructure, but that investment comes with great gains – for every $1 invested in infrastructure, $3 returns to the country’s nominal GDP.

“Our priority is to accelerate economic growth, which is impossible without an effective banking sector”

The $3 billion sovereign bond issue in September of last year was the first since restructuring debt in 2015. Do you have plans for new issues?

Indeed, last year Ukraine managed to successfully enter the market with a $3 billion issue that, by the way, was recognized as the best transaction in Central and Eastern Europe, Middle East and Africa in the year 2017. This year, within the framework of the IMF program, the indicative amount of external commercial loans is $2 billion. We constantly analyze market conditions in order to issue euro bonds on the most favorable terms.

Ukraine controls around 55 percent of the country’s banking sector. What are your plans for privatization and do you foresee a return to profitability in 2018?

Our priority is to accelerate economic growth, which is impossible without an effective banking sector. In February 2018, the government approved the updated strategic reform principles of the state banking sector. The strategy is to be implemented within the following 5 years. The key tasks of the Strategy are the significant reduction of the state share in the banking sector through the complete or partial sale of state-owned banks; increasing competition in the banking sector; support for financial stability; resumption of loan supply for the real economy sector; and improving access to banking services. The implementation of the strategy will make it possible to achieve substantial benefits for the entire banking sector by ensuring access to additional funding at more attractive rates and by generating additional revenues for the state budget. Currently, we are holding negotiations concerning the privatization of Ukrgasbank and according to the recently approved “Development Strategy” of PrivatBank, in 2022 PrivatBank plans to receive UAH 8.4 billion ($320 million) net profit and will be ready for the exit of the state from the control of its stock.

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