Outgoing Ukrainian Finance Minister Natalie Jaresko speaks on April 14 at an event hosted by the Atlantic Council and the Centre for International Governance Innovation in Washington. (Photo: Atlantic Council/Victoria Langton)
Outgoing Ukrainian Finance Minister Natalie Jaresko speaks on April 14 at an event hosted by the Atlantic Council and the Centre for International Governance Innovation in Washington. (Photo: Atlantic Council/Victoria Langton)

I would never suggest that IMF spring meetings in Washington are devoid of emotion, but it is rare to witness a feature speaker battling tears.

Natalie Jaresko’s eyes were red as she began her talk on April 14 at an event hosted by the Atlantic Council and the Centre for International Governance Innovation. Hours earlier, she had learned that the government in which she was finance minister had been replaced by a new one led by Volodymyr Hroisman. Jaresko refused to criticize the new prime minister, but she won’t be joining him. The former government of Arseny Yatseniuk was formed around a core of technocrats like Jaresko, a former U.S. diplomat and investment banker. Hroisman has assembled what Jaresko called a “political” government. “The new government is set up with a different logic” than Yatseniuk’s, she said.

The departure of Jaresko could shake the confidence of international investors in Ukraine. She spoke the language of diplomats and investors in comforting, American-accented English. Her remarks in Washington were followed by a long applause by about  100 people who crowded into a hotel meeting room to hear her speak. As a political outsider, Jaresko was unassociated with Ukraine’s long history of political corruption. Those things matter in places that have a fraught relationship with foreign capital. Her refusal to join Hroisman will be seen by many as a reason to distrust the new government.

Ukraine appears to have turned a corner. Its gross domestic product will expand 1.5 percent in 2016, climbing out of a deep recession that saw GDP plunge more than 9 percent in 2015, according to the IMF. But there is reason to worry the recovery could stall. The IMF hasn’t dispersed the third installment of the US$17.5-billion bailout agreed last year because of disagreements over the previous government’s budget. The peace between Russia and Ukraine is fragile; it’s been more than a year since the two countries agreed to a truce in Minsk, and still the terms remain unfulfilled. Corruption remains a chronic problem, especially in the judiciary. Some see the rise of Hroisman as evidence of the Ukrainian elite reasserting itself.

Still, the end of weeks of political uncertainty should restart efforts to convince the IMF to release the next round of funding. Jaresko pleaded with Ukraine’s allies to stand by her country. She said the economy and the currency are stable and that Ukraine is poised to become a manufacturing hub because labour costs a fraction of what it does in neigbouring countries. A startup friendly patent system is helping to foster a technology scene that is giving younger Ukrainians a reason to stay rather than flee to Western Europe. The country’s tax-collection system now is fully automated, bolstering the government’s ability to raise revenue and curb opportunities to cheat. “No country has come so far, so quickly,” Jaresko said. 

Still, the end of weeks of political uncertainty should restart efforts to convince the IMF to release the next round of funding. Jaresko pleaded with Ukraine’s allies to stand by her country. She said the economy and the currency are stable and that Ukraine is poised to become a manufacturing hub because labour costs a fraction of what it does in neigbouring countries. “No country has come so far, so quickly,” she said.

Jaresko no longer was in a position of authority, but she offered the United States and its allies some advice on how they should approach Ukraine. One mistake outsiders appear to have made was assuming policies popular in Washington would be embraced by Ukrainians. “While our reforms were hailed abroad, we were getting buried in Ukraine” by an unsympathetic media, she said. There also was a suggestion that Western aid was a little skimpy. Jaresko advised patience with her country, and called on the United States to reward achievement with significant aid. “Ukraine is too important,” she said. “There is too much at stake. I ask you to stay fully committed to Ukraine.” 

The departure of Jaresko could shake the confidence of international investors in Ukraine.
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