Rada extends land sale moratorium for 2017

Ukraine’s parliament (the Verkhovna Rada) approved on Oct. 6 a bill prolonging a moratorium on the free trade of agricultural land for one more year until Jan. 1, 2018. The initiative was supported by 297 MPs, including 167 MPs of the two coalition parties. The bill was approved just three days after the IMF disclosed its documents of its second review of its External Funds Facility program with Ukraine.

Based on the documents, the submission of a draft law on the free circulation of agricultural land to parliament is a new structural benchmark, or one of the key pre-conditions for Ukraine to pass the third review under the IMF program, scheduled for mid-November 2016. The IMF also expressed its expectation that parliament will approve such legislation by the end of 2016.

Alexander Paraschiy: The adopted bill has yet to be signed or vetoed by president. We do not expect a veto since 1) such a move won’t be politically popular (support for free trade of farmland has been demonized for many years in Ukraine); 2) the majority of pro-president faction MPs (97 of 143) voted in favor of the moratorium.

It doesn’t contradict the IMF agreements, in our view, and there is no explicit deadline for lifting the moratorium on agricultural land trading in any IMF documents. Thus formally, Ukraine may meet its required structural benchmark by merely submitting a draft law, even without a vote and even if it calls for opening the land market ten years down the road.

On the other hand, the moratorium violates the spirit of negotiations with the IMF, which expected that free trade of land will “generate significant economic gains, including higher incomes and greater tax revenues.” Thus far, the IMF hasn’t made public its reaction to the moratorium.