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Also, collection of taxes has increased significantly (34% increase in 2 years) and spending has been contained while at the same time energy/utility tariffs have increased dramatically at full cost recovery basis.

The main reforms agreed with the IMF include the privatisation of large state enterprises such as the Odessa Portside Plant and Centrenergo, the lifting of the embargo on the sale of agricultural land to foreigners, the raising of the pension age, the restructuring of the health system and the increase in efforts combating corruption.

Most of these reforms, although not expected to be completed in the immediate term, they are expected to be implemented in a gradual process.

For example, land reform may be initiated partially by privatising state agricultural land (1 billion hectares). 25% of world’s black-earth soil is in Ukraine, considered the most fertile and productive agricultural land. Over 70% of Ukraine is agricultural land valued at US$100 billion. Ukraine is the biggest exporter in sunflower oil globally, 2nd in world grain exporter after the US and 3rd in corn exports globally. The land reform is expected to elevate the country’s performance with significant FDIs from international investors.

On the pension front, the Cabinet of Ministers approved the draft of the pension reform-IMF and World Bank already supported the draft- and will discuss it at the National Reform Council, to be then submitted to the Rada (parliament). The pension reform was long overdue, given that the Pension Fund deficit reached UAH 140 billion or 6.3% of GDP in 2016. Pension reform is considered to be one of the most socially sensitive reforms the government is planning to implement under the current IMF Extended Arrangement. However, it seems that the government has managed to avoid the most unpopular measure of increasing the statutory pension age while increasing the effective pension age. The proposed reform will assist in reducing the deficit starting from mid-2018.

The implementation of the reforms should assist the government in managing the debt profile of the country presented below. While there is no imminent need for IMF disbursements, 2019 (presidential and parliamentary) elections coincide with a US$7 billion peak of public sector FX needs, while US$12 billion is due in total in 2017-19. The authorities need to secure sufficient FX funding in advance, while the alternative funding sources are limited. The FX reserves increased to US$17 billion, but cover 3.8 months of imports only.

As already described in the recent IMF review, Ukraine is expected to re-access the international capital market as early as the second part of 2017 supported by the improved debt profile resulting from the recent debt operation (perimeter of the debt operation included sovereign and sovereign guaranteed Eurobonds, City of Kyiv Eurobonds, Guaranteed Commercial Loans and SOE debt) for a total nominal

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