Money For Discipline

A World Bank delegation led by Luca Barbone, director for Ukraine and Belarus, left Kyiv after this year’s first visit to start proceedings to provide Ukraine with another program adjustment loan (PAL). The latter, being the bank’s principal credit program for 2001-03, consists of three loans totaling $750 million, each to be granted separately, proceeding from Ukraine’s performance. The first loan ($250 million), adopted by the board of directors in September 2001, was aimed among other things at stepping up the land reform by supporting property rights, reducing pension and pay arrears at spending units, enhancing the transparency of the privatization process, and improving the financial status of the energy sector.

Mr. Barbone said on February 14 that the purpose of the talks between the mission and the Ukrainian cabinet was reaching an agreement concerning further tentative program indices; the agenda included measures to improve financial discipline, protection of property rights, modernization of the legal framework, along with lowering social and ecological risks. While in Ukraine, Mr. Barbone signed two grant agreements, including $446,000 supplied by Japan for the preparation of PAL-2, and $228,000 from the World Bank to enhance the government’s accountability to the public.

Mr. Barbone said that the Ukrainian cabinet’s performance in terms of reform was “not bad” in many respects, especially in the agrarian sector. In his words, the World Bank is satisfied with the privatization process in Ukraine, which is particularly true of the preliminary arrangements for the privatization of the oblenerho regional electric companies. At the same time, he expressed concern about the situation in the coal industry, since a great deal of resources are being spent there.

The next round of talks concerning the second program adjustment loan is expected in May 2002 and Mr. Barbone believes the matter can be presented to the board of directors in September.