Farmland market to be approved this year, presidential economic adviser says

The Presidential
Office of Ukraine plans to cancel the moratorium on the sale of farmland by the
end of this year, deputy head Oleksiy Honcharuk told an interview with
Bloomberg News published on July 30. “There’s an understanding in the team that
if it’s not done this year, it will be quite difficult,” said the 35-year-old
Honcharuk, identified as head of the president’s economic team and potential
candidate for prime minister. The team is discussing with the World Bank the
model of the farmland market, including whether to allow foreigners to enter
and limit purchases. An open farmland market has the potential of adding
between 0.5% and 3.0% to annual GDP growth, he said. “We’re looking for the
least painful but most efficient version,” he said.

The market’s
creation would be part of a staff-level agreement with the IMF in September for
a three- to four-year program to replace the current Stand-By Agreement that
expires at the year end, Honcharuk said. The team is planning market-based
economic policies that the likes of Poland and Hungary introduced two decades
ago, Bloomberg News said. Besides a farmland market, the president’s team wants
to sell large state enterprises, starting with banks. “I want 10 big systemic
banks to enter Ukraine,” Honcharuk said. “When we show changes in the approach
to privatization, farmland sales, when we attract a couple of big companies to
extract natural resources – all of those examples will give clear signals that
the rules have changed,” he said.

Zenon Zawada: Approving legislation to launch the
farmland market now looks likely for this fall. Organizing and launching the
market will be difficult, not likely to occur for at least another year. We are
confident that Zelensky’s poll ratings will plummet at least 5%, but possibly
closer to 10%, once the market is approved in parliament. Between 66% and 77%
of Ukrainians oppose its creation, according to polls, despite all the gains
they stand to make. They don’t trust state officials to create such a market in
a fair and organized way. If Zelensky’s team is able to organize a fair and
well-functioning market, the president could eventually recover much of the
lost support related to its creation.

Approving legislation to create the market will be a critical step in securing a new IMF loan
program. Once a multi-year program is approved, Zelensky will have to pursue
pro-Western policies in order to continue receiving IMF loan tranches. 
Any decisions in Russia’s favor, such as cutting a deal on Donbas in exchange
for cheaper natural gas, would threaten Ukraine’s ability to draw IMF loan
tranches. So we believe Zelensky is likely to pursue a pro-Western political
course during his presidency, though a sudden turn towards Russia is possible.