2021 will see Ukraine return to a variation on the pre-2019 norm: balancing between reform and vested interests. Persistent financing difficulties should produce enough pressure to see at least some reform progress.
One year ago, Ukraine seemed ready to embark on a path of sustainable growth, demolishing the oligarchic structures that have throttled the country’s development since independence. But the reform drive has dissipated. Oligarchic power struggles crept back, forcing the sacking of a technocratic government in March and the leadership of the National Bank of Ukraine (NBU) in July, and in October, the Constitutional Court derailed much of the past years’ anti-corruption progress. Relations with the IMF soured, although a rapprochement began late last year.
Political risks persist. Hopes that Zelensky’s powerful mandate might banish Ukraine’s chronic political instability have been dashed. Last September’s elections hastened the splintering of SOTP into various factions, making deals both within the party and with the opposition essential for policymaking this year. With no quick fix to the constitutional court’s obstructionism available, the tug-of-war between the justices and the president will likely drag on, potentially into the medium term. National policymaking will also increasingly require painstaking negotiations with local authorities. All these issues will again risk cancellation of the IMF programme – which would entail the end of EU and World Bank funding too, and a prohibitive rise in borrowing costs.
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