The World Bank’s Board of Executive Directors today endorsed a new Country Partnership Strategy (CPS) for Ukraine covering the period of 2008-2011, according to a WB press-release. The CPS outlines the priorities for the Bank Group’s engagement through lending and investments, analytical and advisory services, and technical assistance.
The strategy proposes a lending range of US$ 2-6 billion over four years, with annual lending levels modulated by a series of performance benchmarks, including progress in structural reforms, macroeconomic stability and improvements in the implementation of existing World Bank loans. In addition, the International Finance Corporation (IFC) will continue to invest significant resources to support the private sector in Ukraine.
Analytical and advisory services will be a central component of the new strategy. This includes research into specific development challenges of Ukraine but also hands-on advice and technical assistance, including assistance through IFC’s expanded advisory services. “As Ukraine’s access to international capital markets has improved, its relationship with the World Bank Group is changing,” says Paul Bermingham, Country Director for Ukraine, Belarus and Moldova. “We are responding to Ukraine’s needs by making our lending cheaper and more efficient. We are also allocating additional resources to bring global knowledge and country-focused solutions to the wide range of development priorities on which there is consensus in Ukraine.”
The new strategy builds on an analysis of Ukraine’s key development challenges. To sustain growth into the future, the CPS notes, Ukraine will need to: (i) improve its international competitiveness, (ii) reform its public finances and the public sector to improve the quality of public services and ensure all Ukrainians benefit from economic growth, and (iii) tackle weaknesses in public and private sector governance.
In response to the first, the CPS proposes to improve competitiveness with investments in public sector infrastructure (in particular transport and energy efficiency), advisory services and advocacy work, technical assistance and access to credit lines to strengthen the financial sector, and global knowledge sharing to promote innovation and technology adoption. To help Ukraine improve the quality of public services and better meet the expectations of its population, the CPS suggests that Ukraine needs to spend better, not more, and focuses on improvements in the efficiency of public spending and public financial management more generally. The strategy also envisions the continuation of financial assistance in support of economic reforms through the Development Policy Loan program, expected to provide budget financing in the range of US$400-600 million annually.
Governance and Anti-Corruption efforts will cut across the CPS. The document acknowledges that while there is consensus in Ukraine that corruption is a serious problem and governance needs improvement, there is not yet consensus on the specific reforms and measures to address each. It therefore emphasizes the importance of strengthening the demand for good governance by working with a broad group of stakeholders.
“Ukraine’s political environment is quite dynamic,” says Martin Raiser, Task Team Leader for the CPS. “For us this is both a challenge and an opportunity. It is a challenge to respond flexibly to the changing needs of the government and the country and an opportunity to work with a wider group of partners and interested parties to find development solutions that are sustainable, equitable and efficient.”
Since Ukraine joined the World Bank in 1992, commitments to the country total around US$5 billion for 36 operations. The Bank’s current portfolio there consists of 13 active projects totaling US$1.3 billion, and about 6 additional projects under preparation. IFC has invested a total of US$742 million in 35 projects to date, while the gross exposure of the Multilateral Investment Guarantee Agency (MIGA) during 1998-2007 has been standing at US$ 244.6 million.
