Parliament adopts last IMF-demanded law on anti-corruption court

Ukraine’s parliament approved on July 12 an amendment
stipulating that newly created High Anti-Corruption Court (HACC) will
immediately take all cases that fall under its jurisdiction from existing
first-tier and appellate courts. The law was supported by 254 MPs out of the
needed 226-vote majority. The amendment had been demanded by the IMF and other
Western authorities.

Recall, the basic law on the HACC, adopted on June 7, contained a
clause that anti-corruption cases already filed in Ukraine’s regular courts
won’t be considered by the new court, nor would their appeals be heard. This
clause was widely criticized by anti-corruption activists, as well as Western
institutions like the IMF.

In particular, the IMF’s June 19 press release, citing its
head Christine Lagarde, clearly stated that the adoption of an amendment to
require the HACC to hear all cases under its jurisdiction, without exemption,
was one of four necessary preconditions for Ukraine to secure a new IMF
tranche.

Other To-Do list items are the adoption of a separate
law to create the HACC (already done), adjusting
household gas prices to import parity levels (yet to be done by the Cabinet)
and addressing some state budget issues (also yet to be done by the Cabinet).

Alexander Paraschiy: Ukraine’s
parliament has fulfilled all that’s under its authority from the IMF’s To-Do
list just as it breaks for the summer. This is an encouraging development that
brings Ukraine closer to a deal with the IMF, opening the window for getting
loans this year from the IMF, the EU and the World Bank at a total amount of USD
3.3 bln.

However, an IMF deal is not yet guaranteed. The last
critical item, agreeing with the IMF on revising household prices for natural
gas, is still an impediment. The Cabinet has to reach this agreement as soon as
possible in order fo the IMF board to approve the loan tranche by its regular
recess in August.

So far, the IMF loan tranche, and all subsequent
lending, remains our base-case scenario. At the same time, yesterday’s decision
of Ukraine’s central bank to hike its key policy rate indicates that the
regulator is becoming less optimistic about the deal. This a worrying signal,
especially given the NBU is among the key negotiators with the IMF and
therefore knows what’s happening behind closed doors.