March 5, 2020

UKRAINE: Questionable government reshuffle will further delay IMF deal

BY Andrius Tursa

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A major cabinet reshuffle just six months after its appointment showcases president Volodymyr Zelensky’s susceptibility to public opinion and internal power struggles within his administration. While the reshuffled government is expected to continue the reform agenda, it is unlikely to be more effective than the previous one. The composition of the new cabinet does not dispel questions about the influence of oligarchs in policymaking, while ongoing cabinet changes are expected to delay the approval of the new International Monetary Fund (IMF) deal.

Yesterday, 4 March, the parliament in an emergency session called by Zelensky accepted the resignation of Prime Minister (PM) Oleksei Honcharuk (independent) and his entire cabinet. This was followed by the immediate appointment of the deputy prime minister Denys Shmygal (independent) as the new head of the government, whose nomination was approved by 291 out of 450 deputies, mostly from the ruling Servant of the People party. Shmygal’s cabinet includes several new members, most notably in the areas of finance, defense, and healthcare. Four cabinet positions – including economy and agriculture, education, energy, and culture – remain vacant.

Honcharuk’s dismissal could be linked to the growing public disappointment over slow improvements in living standards and the underperforming economy. The unpopular cabinet started weighing on Zelensky’s ratings as well, and the cabinet reshuffle is meant to restore public confidence. However, it is likely that a behind-the-scenes power struggle within the president’s team, exemplified by the recent replacement of Zelensky’s chief of staff, was another reason behind the cabinet reshuffle.

Despite the criticism, Honcharuk’s reformist cabinet demonstrated a respectable track record during its six months in office. It has reinvigorated the privatization of public enterprises, advanced the contentious farmland sales bill, and made important steps in cutting Ukraine’s public debt and tackling corruption. These achievements were commended by the IMF, which announced a staff-level agreement – still to be approved by the board – for a new three-year USD 5.5bn program in December.

While Shmygal is yet to present the full composition of his cabinet and its priorities, he pledges to continue the reforms started by his predecessor. However, as a novice at the top-level politics he is unlikely to significantly accelerate the reforms. Prior to his appointment as Honcharuk’s deputy in February, Shmygal’s political experience was confined to regional-level posts. In recent years, he has been heading a coal-fired power plant controlled by oligarch Rinat Akhmetov’s company, a connection that inevitably attracts public scrutiny.

Some of the most concerning cabinet changes include the replacement of finance minister Oksana Markarova (independent) – a proven reformer holding excellent relations with the IMF – with Ihor Umansky (independent). While being an experienced technocrat, Umansky is known for his cautious views on Ukraine’s cooperation with the IMF. The departure of the well-regarded economy minister Tymofiy Mylovanov (independent) – the key promoter of the land reform – is another worrying sign in this respect. Moreover, the appointment of Illya Yemets (independent) as health minister – who already held the position under the presidency of Viktor Yanukovych in 2010-2011 – is a controversial move that could roll back reforms in that area. However, no changes are expected in foreign policy as former foreign minister Vadym Prystaiko (independent) was appointed as the new deputy PM for European and Euro-Atlantic integration thus swapping positions with the pro-Western diplomat Dmytro Kuleba (independent).

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