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Action Plan of the Government for 2016

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Action Plan of the Government for 2016 Action Plan of the Government for 2016 1 Goal set by the Government Ukraine is currently under exception circumstances having survived deep political and economic crisis against the background of Crimea occupation and war in the East. However, a reason of such crisis is deeper that current political and economic shocks or Russian aggression. Procrastination with the necessary reforms throughout the course of 25 years of independence resulted in it. Ukraine is one of the weakest reformers among Eastern European countries, i.e. changes that happened in the country from the time of collapse of the communist camp are not as great as those in the neighbouring EU member states. Consequences of such procrastination turned out to be disastrous for the Ukrainians. Starting from the 90s being somewhere at one level of economic development with such countries as Poland, Slovakia and Romania we are now trailing them multiple times. The rates of economic growth in Ukraine are much lesser than the growth rates of the economies of our Western neighbours. Salaries of the Ukrainians are 3 to 5 times lowers that the salaries paid to the Poles, Slovaks and Romanians. Nevertheless, Ukrainians can catch up with its neighbours and achieve the same level of economic development and welfare. Quality human capital, advantageous geographical position and powerful base of natural resources create high potential not only to overcome the crisis but also for rapid development of the country. Such potential can be implemented only by means of drastic and effective European reforms, which should bring results visible for the people. The goal set by the Government is to ensure growth of the people's standard of living and improve quality due to sustainable economic development. Preconditions for achievement of such goal are ensuring national safety, macroeconomic stability, development of favourable business environment, strengthening rule of law and counteraction to corruptions and improvement of quality of public administration. In turn, these strategic priorities determine a set of immediate steps which should be taken by the Government before the end of a current year. Strategic priorities of the Government I. Macroeconomic stabilization , which provides for stability of public finance, low inflation and high stability of the financial system. For the main part of its history throughout the course of the last decades Ukraine has been in the condition of constant macroeconomic instability – population was becoming poor because of high inflation and devaluation, bankruptcy of the enterprises entailed loss of workplaces, savings of the people were disappearing under the circumstances of collapses of the banking system. To a considerable extent permanent economic collapses resulted in a considerable trailing of Ukraine from its Eastern European neighbours. Securing macroeconomic stabilization achieved in such a difficult manner is one of key priorities of the Government. However , not only stabilization of a current situation should become a goal 2 and result of reforms but also achievement of a long-term macroeconomic stability without which it will be extremely difficult for Ukraine to achieve high level of economic development. For this purpose, the Government will implement a prudent and responsible economic policy. II. Development of favourable conditions for business development is a necessary precondition in order for Ukraine to achieve greater level of its economic development and successfully integrate with the European states. Only at the cost of sustainable growth of GDP it will be possible to ensure stable and high level of incomes as well as social payments to the people. III. Establishment of the rule of law and counteraction to corruption were the main requirement of the Revolution of Dignity as impunity of criminals, impossibility to achieve fair justice and pervasive corruption made people come to Maidan. The level of trust of the society to a judicial system is still extremely low and assessments of the level of corruption – very high. After the Revolution of Dignity they took specific measures in terms of restoration of the rule of law and overcoming corruption. A chain of anti-corruption institutions, which complement each other and the goal of which is overcoming the most destructive corruption at the highest level, is developed. However, the scale of problems related to justice and corruption still remains high and further efforts are required from the public authorities in order to overcome them. IV. Improvement of quality of public administration and public services will restore trust of the people to its state and it will allow the business to work efficiently and also create workplaces and grow. After the Revolution of Dignity they launched such important reforms in this sphere as decentralization and public service reform, which the Government is expected to continue actively. Such goals complement each other. Long-term macroeconomic stability cannot be achieved without sustainable growth of the economy. In turn, sustainable economic growth requires both macroeconomic stability and rule of law. The rule of law and ability to counteract corruption are grounded both on quality public administration as elimination of any possibilities for the corrupt activities by means of deregulation of the economy and minimization of interference of the officials with the economic activities. Building quality public administration and provision of quality public services require the foundation as the rule of law and ability to counteract corruption in an efficient manner. The prioritized reformist measures specified in this document, their order, ways of implementation and the benefit they will bring directly to the citizens of Ukraine are designed for achievement of the aforementioned strategic goals. V. Restoration of the people's safety , which is jeopardized by the Russian aggression, war in the East and deterioration of a crime situation and social problems caused by the war. Aggressive actions by the Russian Federation, namely, from occupation of Ukrainian territories by it and direct military intervention to information and trade war jeopardize sovereignty of Ukraine and existence of it as a state. Successful counteraction to the Russian aggression both in terms of military and foreign policy, information and other spheres is a key assignment of the Government. Special attention on this way will be paid to a maximum improvement of cooperation with NATO countries. Strengthening internal cohesion, integration of internally displaces people, restoration of normal life within the territories, which suffered from the Russian aggression, recovery of 3 communications with the inhabitants of occupied territories of Donbas and Crimea is no less important. Key areas of reforms for achievement of strategic goals I. Macroeconomic stabilization, first of all, requires responsible and prudent fiscal policy from the Government as it is the area of public macroeconomic policy the Government is responsible for. In 2016 the main assignment is to keep the macroeconomic stability achieved in a previous year and continue further improvement of public finances, which provides for implementation of reforms, which will become those preventing from re-occurrence of similar crisis in future. 1. Reforming public finance management system. One of the reasons behind constant crises in the sphere of public finance, which Ukraine faces, are lack of effective rules that would have limited a possibility of irresponsible spending of the funds and ensured efficiency of such spending. As opposed to more developed countries, where stricter budget constraints are effective and there are possibilities for the Ministry of Finance of Ukraine to control volumes of spending accurately, the role of the Ministry of Finance of Ukraine is relatively weak in Ukraine and budget constraints are often violated. It results in spending, which the country cannot afford and which are financed in the manners destructive for the economy, namely, printing of the money, accumulation of indebtedness and others. Poor planning of costs by the spending units results in low efficiency of use of the funds and poor quality of public services. A strong role of the Ministry of Finance of Ukraine, observance of strict budget constraints, efficient use of the funds and implementation of a mid-term budgetary planning will prevent from similar violations in future. 2. Pension reform. A pension reform in Ukraine is chaotically organized and it is in a state of chronic deep deficit. Pensions in Ukraine are paid on the basis of more than 20 laws each having its own rules. Certain categories of pensioners benefit from the privileges, namely, a rule to retire much earlier than a retirement age established for ordinary people, which creates considerable financial pressure on the Pension Fund. In fact, a substantial share of pension payments is not related to the pensions themselves and it just represents an additional payment to one or other categories of retired people from the state budget. As a result, calculation of the pension received is non-transparent for the people and detached from the contribution, which a person pays to the Pension Fund, which transforms such contributions to the form of taxation, which the persons are actively trying to avoid. Accumulation of additional payments, additional charges and privileges undermine the financial position of the pension system and put it under a threat of
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