15th Annual Ukraine Investor Conference: Macroeconomic panel discussion with government officials and IFI representatives

Dragon Capital held its 15th Annual Ukraine Investor Conference on Feb. 12-13 in Kyiv.

The event drew about 400 foreign investors and local guests, with foreign institutions whose representatives attended boasting over $3 trillion under management, invited speakers and media representatives. This was matched by a high-profile speaker faculty, which included the president and prime minister of Ukraine, the National Bank governor, senior Cabinet officials, and many others. The size of the audience, one of the largest in the history of our events, demonstrated investors’ keen interest in Ukraine’s double elections this year, presidential in March and parliamentary in October. Politics was, therefore, a major focus of the conference.

Below please find our summary of the Macroeconomic panel discussion with government officials and IFI representatives.


Moderator: Daniel Bilak, Chief Investment Adviser to Prime Minister of Ukraine


  • Yakiv Smolii, Governor, National Bank of Ukraine
  • Oksana Markarova, Finance Minister of Ukraine
  • Oleksandr Saienko, Minister of Cabinet of Ministers of Ukraine
  • Gosta Ljungman, Resident Representative in Ukraine, IMF


  • Mr. Smolii summarized key economic developments in 2018: GDP rose an est. 3.3%, the fastest rate in the past seven years; inflation slowed to single-digit 9.8% y-o-y; F/X reserves reached around $21bn, returning to their pre-crisis level; and the banking system again became profitable. The NBU expects economic growth to continue this year, albeit at a slightly slower pace, inflation to decelerate to 6.3% y-o-y, and F/X reserves to remain close to the current level. The banking system is well capitalized, and the outstanding volume of deposits and loans keeps growing. Reinvigorating corporate lending is a top priority for the central bank.

Macroeconomic stability and cooperation with the IMF and other external partners are the key prerequisites for positive macro developments, while election-related uncertainty poses the major risk. The NBU may start monetary easing in 2019 if inflation remains close to the forecast trajectory.

The NBU remains independent, feeling no influence from either politicians or presidential candidates. Its independence is well protected by the current central bank law, and all leading presidential candidates have declared they will obey the rule of law.

  • Ms. Markarova stressed that financial stability, prudent fiscal policy and appropriate monetary policy run by an independent central bank were conducive to the past 12 quarters of economic growth. An IMF program remains crucial to maintaining macro stability, attracting investors and creating a foundation for growth. The Finance Ministry is gradually shifting to three-year budget planning, which would prioritize reform-related spending, and recently adopted a mediumterm debt management strategy, which aims to decrease debt-to-GDP to under 50% in three years. Key steps needed to speed up economic growth are to address structural imbalances, increase productivity and trade volumes and create resilient institutions that are not dependent on recurring elections.

On borrowing plans, Ms. Markarova said concessional financing will be prioritized over market financing. The Ministry is in discussion with the World Bank about a new guarantee and with G7 countries on additional budget support. There are no plans to ask for budget financing from the IMF. She also would like to see more UAH borrowings and improve the currency structure of the outstanding deb stock.

  • Mr. Saienko focused on reform of state-owned enterprises (SOEs) and management of state property. The government is working on new, efficient instruments to manage state property by drawing on the experience of developed countries. In the field of corporate governance, it is essential to change the way SOEs are managed. The government set up a nomination committee responsible for recruiting professional management and members of independent supervisory boards, and we had five successful cases of appointing professional and independent supervisory boards in 2018. At present, the 3,500+ SOEs are directly managed by Cabinet ministries, which is a heavy burden. The Economy and Trade Ministry alone manages over 500 SOEs. The task is to take this burden off the ministries to let them focus on policy development. The role of controlling state assets should be delegated to the newly created supervisory boards, and the ministries, as owners, should set strategic goals and KPIs. Along with this, the SOE sector must be downsized through privatization.

Decentralization, in the framework of which local authorities saw their budgets increase several times, is bearing fruit. The 874 new consolidated communities created to date have built over 3,000 new properties over the past three years, including kindergartens, schools, hospitals.

  • Mr. Ljungman said the IMF’s assessment of Ukraine’s economic development was similar to that of the NBU. Many economic imbalances have been resolved; the new monetary policy framework (inflation targeting and flexible exchange rate) have completely changed the picture; the NBU undertook a resolute approach to reforming the banking system; pension reform was an important step towards fiscal sustainability; anti-corruption institutions were introduced; and improvement in public procurement was a step in the right direction. Important areas for the IMF include removing price controls in the domestic gas market, which create distortions and room for corruption, improving tax and customs administration, accelerating privatization, and implementing land reform. Three priorities to reach 5% GDP growth would be: maintaining macro-economic stability, attracting foreign and domestic investment, and opening up the farmland market.

He said there was a possibility to channel IMF tranches to the state budget, as was done before. However, there is no necessity to do it this year, as the 2019 budget is fully financed.