Ukraine failure to launch e-declarations endangers international support

The Ukrainian government launched on Aug. 15 a system of electronic asset declarations that requires all elected officials and employees to declare all the income and assets of themselves and their relatives. The launch came three days after the Information Protection State Service declined to grant the system a security certificate, alleging it falls short of technical requirements. The e-Asset Declaration System is aimed at enabling law enforcement authorities and the public to compare the official declarations of state officials with their lifestyles and help them determine whether they engaged in corruption. Inaccurate or incomplete information submitted to the system may lead to up to two years’ imprisonment.

Advocates of e-asset declarations said the certification was denied with the intent to ensure that those exposed can’t be prosecuted because the system lacks legal recognition and no one can be charged for incomplete information. Yet they also cited graver consequences of the lack of certification such as delaying the launch of a visa-free regime with the EU and threatening future loans from the IMF and the EU, as argued by Vitaliy Shabunin, the head of the Anti-Corruption Action Center, a Western-financed NGO in Kyiv. The Aug. 15 launch is indeed a testing period, he said.

Yuriy Novikov, the head of the IT company that designed the system, said in response that the state service offered no written remarks concerning the designed software. “All the written remarks were about supplementary documentation,” he wrote on the evening of Aug. 14. “Had we received the comments by 2 p.m. on Saturday (Aug. 13), as we were promised, the documentation would have been already corrected,” he wrote. The certificate won’t be issued soon, he said, citing a series of verbal complaints that have since emerged from the officials.

Alexander Paraschiy: Given the widespread corruption, few people in the Ukrainian government are interested in the full launch of this system, which will put many high-ranked officials under the threat of being prosecuted. Once again, the Ukrainian public can only depend on pressure from Western officials to ensure the anti-corruption mechanisms are implemented. We can’t confirm whether IMF financial support is indeed linked to the successful launch of this e-Assets Declaration System, but we share the view of Shabunin that EU officials can freeze all their programs with Ukraine due to this current delay.

Ukraine should receive by the end of this year about USD 4.4 bln in loans from its Western partners, including USD 2.7 bln from the IMF (in tranches of USD 1.0 bln and USD 1.7 bln), EUR 0.6 bln from the EU and USD 1.0 bln in loans under U.S. guarantees, according to the expectations of Ukraine’s central bank. Of all this money, Ukraine is very unlikely to receive the second IMF tranche (USD 1.7 bln) planned for this year. Given the recent developments, all the other loans look less certain. This is negative for Ukrainian sovereign bonds, which started losing ground already last week because of the latest conflict with Russia.