In Digest, Ukraine

By Nick Shchetko in Kiev, Ukraine and James Marson in Moscow, Wall St. Journal, Dec. 2, 2014

Natalie Jaresko, Ukraine's new minister of finance, pictured in Davos, Switzerland in 2013, photo by Victor Pinchuk Foundation

Natalie Jaresko, Ukraine’s new minister of finance, pictured in Davos, Switzerland in 2013, photo by Victor Pinchuk Foundation

Ukraine’s parliament appointed a new, pro-Western government that includes a U.S.-born finance minister to take on the job of staving off financial collapse, overhauling the shrinking economy and ending the armed conflict in the country’s east.

After a chaotic day of rambling speeches, drawn-out questioning and last-minute horse trading Tuesday, the chamber by a large majority backed ministers proposed by a coalition of parties loyal to President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk, who was reappointed last week. Related Articles

The new cabinet includes Finance Minister Natalie Jaresko*, the chief executive of a private-equity fund and a former U.S. diplomat, as well as two other non-natives: Economy Minister Aivaras Abromavicius, a former investment banker from Lithuania, and Health Minister Alexander Kvitashvili, who held a similar post in Georgia.

The appointments came as the latest efforts to stop sporadic fighting between government forces and Russia-backed separatists foundered, underscoring the challenges. Shooting resumed at the regional airport in Donetsk, the last government-held outpost in the rebel-held city, less than 24 hours after a truce was agreed. Officials from both sides said they were still in talks on a broader ceasefire, which has failed several times.

The government’s immediate task is to stabilize Ukraine’s shaky finances. The currency, the hryvnia, has lost nearly half of its value against the dollar this year and the central bank’s foreign-currency reserves are at their lowest in almost a decade, at $12.6 billion. Ms. Jaresko, a Harvard graduate who grew up near Chicago, said the cabinet would prepare a budget by Dec. 20.

Ukraine is dependent on the International Monetary Fund for financing and officials and analysts say it will need more than the current $17-billion program from the lender.

European Union finance ministers will discuss Ukraine’s financing needs at a meeting Dec. 9, in particular what additional loans the bloc could give on top of €1.6 billion ($2 billion) already approved, diplomats said Tuesday. No decisions are expected, they said, but talks will focus on possible conditions.

Ukraine has requested an additional €2 billion for 2015—an amount that EU officials have privately said is probably too high.

Two senior EU officials said Tuesday that the IMF has in recent days shared a rough estimate of $15 billion in financing needs for Ukraine through until the first quarter of 2016, although that could be revised as fund officials negotiate with the new government.

Shortly before the voting in Kiev, President Poroshenko signed a decree granting Ukrainian citizenship to the three foreign-born candidates. He said the dire economic situation meant Ukraine had to look for people outside the country with experience of dealing with “systemic crises.”

In his speech to parliament, Mr. Yatsenyuk pledged radical overhauls to the bureaucracy-laden economy, which is forecast to contract by at least seven per cent this year. ”People are waiting for change, and we are ready for the toughest, the most radical and the most efficient reforms in the country that are needed today. The mission will be accomplished,” he said.

Valeriy Voshchevskiy, deputy prime minister for infrastructure and ecology, said he wanted to privatize state holdings such as the railway and road-building monopolies. “We have a monopoly in every subdivision of the ministry, state monopolies that are totally corrupt,” he told parliament.

Mr. Yatsenyuk has served as prime minister since the end of February, when the previous, pro-Russia president fled amid street protests. His government fought against Russia-backed separatists in the east and prevented outright financial collapse, but is seen as having offered more talk than action on overhauling the economy.

“Too many things are written, by many, on what Ukraine has to do. Now we need someone to implement all this,” said the deputy head of the presidential administration, Dmytro Shymkiv. He added that Ukraine deserved a failing grade for its performance on reforms so far this year.

The new government has several other ministers continuing in their posts, including Interior Minister Arsen Avakov, Defense Minister Stepan Poltorak and Foreign Minister Pavlo Klimkin.

Some analysts praised the inclusion of outsiders in the government as a way to tap foreign experience, insulate against corruption and help push through unpopular economic overhauls. But opposition lawmakers slammed the decision.

“We don’t understand why from 300 coalition members and 40 million people [in the country], 10 minister candidates couldn’t be found who’d be Ukrainian citizens or at least ethnic Ukrainians,” said Yuriy Boiko, head of the Opposition Bloc and a former energy minister.

The government was approved by 288 deputies in the 450-seat chamber, about a dozen short of the full coalition.

In a sign of early discontent, some lawmakers from the ruling coalition questioned the creation of a new Information Ministry, dubbed the “Ministry of Truth” by some journalists amid concerns that it could create another expensive layer of bureaucrats. The newly appointed minister said earlier that it will be needed to counter Russian propaganda.

* Note by New Cold editor: The new Minister of Finance of Ukraine, Natalie Jaresko, is a U.S.-born citizen of Ukrainian parentage who has worked as an investment fund manager in Ukraine for the past 20 years. Prior to that, she worked at the U.S. State Department, including as First Chief of the Economic Section of the U.S. Embassy in Ukraine from 1992-95. Her former husband (they divorced in 2010) is a former head of the American Chamber of Commerce in Ukraine. Watch for more news on this story on this website in the days ahead.


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