November 11, 2015

Report praises Ukraine’s financial sector reforms

Ukraine is leading the way among emerging economies in financial sector reforms, according to the EBRD’s latest Transition report which says that the outlook for market reforms across the whole area appears to have improved.

The Transition Report 2015-16 shows that many factors holding back the reform process persist. However, despite isolated cases of reform reversal, over the past year “the overall direction has been positive, which bodes well for longer-term growth prospects”.

The report refers specifically to significant progress in infrastructure, as cash-strapped governments increasingly saw the value of private-sector involvement in transport links and municipal services.

Despite continuing problems with non-performing loans, the report notes positive developments among financial sectors as countries have cleaned up their banking systems and made them more resilient to future shocks.

Among these countries, Ukraine has made the most progress. Since 2014, the country has seen the closure of over 50 banks with opaque ownership structures, excessive related party lending and weak management and corporate governance.

An annual EBRD publication, the Transition Report uses a series of indicators to track the progress of structural reforms across the EBRD region that includes central and south-eastern Europe, the former Soviet Union and the southern and eastern Mediterranean.

In infrastructure, progress last year was strongest in the road sector, mainly reflecting an increasing interest in fostering private sector involvement in the building of new roads or in the maintenance of existing networks.

The report refers specifically to the use of public-private partnerships (PPPs) in Polish regional road investments, as well as in Kazakhstan and Albania.

The report says tangible reforms had been less evident in the corporate sector. However, reforms have been put in place in Albania to make it easier to start a business and transfer property. Steps had been taken to strengthen investment laws in Egypt, to protect investors and streamline procedures.

It also saw scope for optimism in the energy sector, noting that the governments of both Egypt and Ukraine, for example, had introduced measures to reduce state subsidies related to energy prices. Serbia also launched the first phase of a corporate restructuring of state-owned energy company EPS.

Reflecting the EBRD’s increased focus on promoting Green Economic Transition, the latest Transition Reportintroduces two new indicators to track the sustainable use of water and other materials adding to the work already being undertaken in the sustainable energy sector.

To read the full report, please visit the Transition Report website.

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About Ian Bearder

Co-Founder and Chairman of ITS Ukraine.

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