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Ukraine has used only half of the loans received in 2014-2016 – Accounting Chamber report

Kyiv, November 27, 2017.

At the recent Eastern Partnership summit, another EUR 1,8 billion EU’s macro-financial assistance to Ukraine was announced. However, the strategy for the use of the loans is missing – priorities, where the money should be directed, have not been figured out. According to the report by the Accounting Chamber, Ukraine has used only 49 percent of the loans received between 2014 and 2016. “If we get to analyze why the level of the funds’ use is so low, we can see in the same report that the lack of the strategy for reforming of various sectors negatively affects the level of the funds’ use. These are either energy efficiency projects, or the ones that concern modernizing housing and utility sector, or infrastructural projects. We also see that particular ministries, responsible for the money we lend for development, work inefficiently. In the end, we face sabotage or delay with the use of the funds disbursed to us by international financial organizations,” independent MP Hanna Hopko explained at a press-briefing at Ukraine Crisis Media Center.

“The key here is not how much funds they disburse but how well we deliver. In 2014, we used 70 percent of the funds, in 2015 – 47 percent, and 42 percent in 2016,” MP Oleksiy Ryabchyn (Batkivshyna faction) said. Among the projects in the energy sector that were secured with loans but later suspended is the renovation of hydroelectric power plants, increasing of electric power transfer efficiency, modernizing gas pipelines,  increasing  energy efficiency, etc. “These projects hired Ukrainian and foreign advisors who get paid well but nothing is being done. Nothing is being done both at local and at central levels. However, the state of Ukraine keeps paying the interest rate on these loans,” MP Ryabchyn added. Over 2014-2016, Ukraine paid a total of EUR 33 million and six million US dollars of interest on the loans provided.

Hlib Vyshlinsky, executive director of the Centre for Economic Strategy, emphasized that the key prerequisite to Ukraine’s positive economic growth is the attraction of investment. On the other hand, the main obstacle to getting the money is the lack of the established project management system in the public sector. “The only public institution that has a full-fledged project management system is Ukraine’s National Bank. The matrix management system has been established there, they have classic vertical structures in which staff has clear subordination and work daily. At the same time, there is a project-related structure comprising people belonging to different vertical structures aiming at meeting a particular goal, for example, to reform the organizational structure of the National Bank or to change the currency management system,” Vyshlinsky noted.

According to Viktor Mazyarchuk, Head of the Parliamentary (Verkhovna Rada) Office for Financial and Economic Analysis, the main reason behind the inefficient use of loans or not using them at all is because Ukraine is lacking a strategy how to attract the money and where to direct it in each sector. “First of all, priorities need to be defined and systematized. Unfortunately, in our daily work we see that strategic documents quite often do not correspond or even contradict each other. Some of points of the strategy ‘Ukraine 2020’ contradict the mid-term governmental plan for 2017-2020. It should not happen a priori,” Mazyarchuk emphasized.

Oleksiy Ryabcyn added that for Ukraine it is important to be analyzing how useful the money would be for the projects that are being offered. “Not all the projects suggested for Ukraine are what Ukraine really needs. We should safeguard our national interests because there are influential lobbyists that have their own interests. We need to be checking the documents we sign, it should become a normal nationwide practice,” the MP emphasized.

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