By Stratfor
June 06, 2016
Summary
This week there were several positive signs for the stability of Ukraine's government, which is normally known for its disunity. On June 2, 355 members of the 450-seat Ukrainian parliament voted to approve constitutional changes that will enable key judicial reforms. Then on June 3, Ukrainian President Petro Poroshenko announced that the next tranche of an International Monetary Fund loan, which had been dependent on Ukraine following through with reforms, would be disbursed as scheduled in the coming months.
Analysis
These events show significant progress for a government that just months ago was debilitated by infighting and rumored to be heading toward early elections. After coming to power following the Euromaidan uprising at the beginning of 2014, the ruling coalition lost many of its allies over differences, causing the IMF to freeze the assistance necessary to repair Ukraine's battered economy. In early April, then-Prime Minister Arseniy Yatsenyuk resigned amid the turmoil, and Poroshenko loyalist Volodymyr Groysman replaced him a few days later. The new administration has since faced intense pressure to deliver on the promised reforms or risk another collapse.
Despite the pressure, Groysman has made impressive strides, raising household utility prices even higher than the IMF mandated and laying the groundwork for major reform with the June 2 constitutional amendment vote. Groysman was able to push the amendment through because of support from Poroshenko's and Yatsenyuk's parties — which remained in the ruling coalition even after Yatsenyuk resigned — and from a large number of independents in parliament. That Groysman has proved adept at making short-term alliances to pass key legislation bodes well for future reforms. Moreover, Yatsenyuk drove through many controversial economic reforms during his two-year tenure as premier, leaving Groysman to field more popular reforms, such as increasing independence in making judicial appointments.
If the reform drives continue, they will be an important step toward unlocking IMF financial assistance and other Western funding, which would lend the Groysman government greater legitimacy. In turn, this could contribute to further political stability in Kiev, something that has been in short supply over the last year as high inflation and growing unemployment drove the Ukrainian economy into deep recession. If the Ukrainian economy begins to grow again in 2016, as it is projected to do, it could empower Grosyman's government to enact even more reforms.
However, challenges still lie ahead for Kiev. One in particular is the conflict in eastern Ukraine between Ukrainian forces and Russian-backed separatists. No meaningful compromises have been reached in eastern Ukraine, despite intense negotiations involving Russia and the West. Indeed, a lasting ceasefire on the line of contact has remained elusive, and fighting has actually increased in recent weeks. Russia and the separatists have maintained that Ukraine must do more on the political front before the security components of the Minsk protocols can be implemented, and a proposed Organization for Security and Co-operation in Europe mission to Donbas has stalled for the same reason. Though Kiev appears to be making progress in its domestic politics, it will likely have a much harder time in advancing its agenda in eastern Ukraine.
A Stratfor Intelligence Report.
"Ukraine Shows Signs of Stability" was first published by Stratfor and is reprinted here with permission.
June 06, 2016
Summary
This week there were several positive signs for the stability of Ukraine's government, which is normally known for its disunity. On June 2, 355 members of the 450-seat Ukrainian parliament voted to approve constitutional changes that will enable key judicial reforms. Then on June 3, Ukrainian President Petro Poroshenko announced that the next tranche of an International Monetary Fund loan, which had been dependent on Ukraine following through with reforms, would be disbursed as scheduled in the coming months.
Analysis
These events show significant progress for a government that just months ago was debilitated by infighting and rumored to be heading toward early elections. After coming to power following the Euromaidan uprising at the beginning of 2014, the ruling coalition lost many of its allies over differences, causing the IMF to freeze the assistance necessary to repair Ukraine's battered economy. In early April, then-Prime Minister Arseniy Yatsenyuk resigned amid the turmoil, and Poroshenko loyalist Volodymyr Groysman replaced him a few days later. The new administration has since faced intense pressure to deliver on the promised reforms or risk another collapse.
Despite the pressure, Groysman has made impressive strides, raising household utility prices even higher than the IMF mandated and laying the groundwork for major reform with the June 2 constitutional amendment vote. Groysman was able to push the amendment through because of support from Poroshenko's and Yatsenyuk's parties — which remained in the ruling coalition even after Yatsenyuk resigned — and from a large number of independents in parliament. That Groysman has proved adept at making short-term alliances to pass key legislation bodes well for future reforms. Moreover, Yatsenyuk drove through many controversial economic reforms during his two-year tenure as premier, leaving Groysman to field more popular reforms, such as increasing independence in making judicial appointments.
If the reform drives continue, they will be an important step toward unlocking IMF financial assistance and other Western funding, which would lend the Groysman government greater legitimacy. In turn, this could contribute to further political stability in Kiev, something that has been in short supply over the last year as high inflation and growing unemployment drove the Ukrainian economy into deep recession. If the Ukrainian economy begins to grow again in 2016, as it is projected to do, it could empower Grosyman's government to enact even more reforms.
However, challenges still lie ahead for Kiev. One in particular is the conflict in eastern Ukraine between Ukrainian forces and Russian-backed separatists. No meaningful compromises have been reached in eastern Ukraine, despite intense negotiations involving Russia and the West. Indeed, a lasting ceasefire on the line of contact has remained elusive, and fighting has actually increased in recent weeks. Russia and the separatists have maintained that Ukraine must do more on the political front before the security components of the Minsk protocols can be implemented, and a proposed Organization for Security and Co-operation in Europe mission to Donbas has stalled for the same reason. Though Kiev appears to be making progress in its domestic politics, it will likely have a much harder time in advancing its agenda in eastern Ukraine.
A Stratfor Intelligence Report.
"Ukraine Shows Signs of Stability" was first published by Stratfor and is reprinted here with permission.
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