Mirror of Transformation: Important Points in the Updated Memorandum with the IMF

Over the weekend, the news about the fourth revision of Ukraine’s program with the IMF somehow got lost in the whirlwind of reports of heat, shelling, and elections in France. The media mostly wrote that the Fund had approved the disbursement of a USD 2.2 billion tranche to Ukraine. Some other information from the memorandum was also mentioned, but what’s important is that it was not only about money and economic benchmarks, but also about political ones, which are to ensure further development of Ukraine and its cooperation with the International Monetary Fund.

This fact is crucial. As is the fact that Ukraine has passed the fourth review of the arrangement for the first time in 30 years. Some requirements were fulfilled on time; others were delayed, but still implemented. Thus, step by step, in wartime and periods of uncertainty, the country gradually ensured macroeconomic stability.

These efforts were noted by IMF experts. The Fund’s representatives understand potential problems and obstacles that may slow down our progress. After reading the report, I realized that all those meetings with IMF representatives, at which we spent hours discussing ways to improve the situation with anti-corruption in Ukraine, were not in vain. On the contrary, sometimes the report mentioned, it would seem, literally the things that we at Transparency International Ukraine had talked about in the past year and beyond. This gives us cautious joy because it is not about isolated changes but a positive transformation of the whole country.

What does the IMF report mention in terms of the rule of law and anti-corruption?

The Fund noted the preservation of Ukraine’s focus on important anti-corruption reforms, pointing out that such actions would help safeguard public funds (in particular, for reconstruction and recovery), convince foreign investors that there was a level playing field in Ukraine, and bring the country closer to joining the EU.

The experts mentioned the law enacted in May 2024 to enhance the efficiency of the High Anti-Corruption Court (HACC), which allows adjudication of corruption cases by a single or panel of judges depending on the severity of the penalty. However, the IMF states that a list of high-ranking civil servants was added to the law as a new criterion for adjudication by a panel, which may have a potential negative impact on judicial efficiency. We at TI Ukraine voiced the same reservations.

The IMF mentioned the need to establish a new high administrative court to hear cases against national state agencies, which requires further consultation with stakeholders. The Fund gives time for this until the end of December 2024.

What is especially important given the recent scandals is that independent auditors based on nominations of international partners should be swiftly selected to conduct the first ever external audit of the NABU. The audit is to be carried out by the end of September, so we have very little time left for this. The IMF noted this as a structural benchmark, that is, a rather strict requirement. According to the Fund’s representatives, an external audit is important because it shall assess, among other things, the mechanisms of internal control and protection against information leakages and negative influence by vested interests. The scandal with the leak in the NABU is not mentioned in the report, but reading between the lines, we understand that the Fund sees everything and takes everything into account.

The Memorandum also indicates the need for immediate progress in other key reforms, including the NABU’s access to forensic experts, the selection and training of additional NABU staff, the appointment and resourcing for new anti-corruption judges, and legislative amendments on corporate criminal liability.

The IMF is also interested in improving the capacity of the SAPO. The text of the Memorandum states that further amendments to the Criminal Procedural Code shall be made to enhance the effective investigation of corruption. In particular, they are necessary so that the Prosecutor General could delegate the management of extradition requests and mutual legal assistance in connection with corruption investigations to the SAPO. These expectations of the Fund were also noted as a structural benchmark.

The IMF is taking a balanced approach to the cancellation of Lozovyi’s amendments. In particular, the text of the report refers to the need to remove the mandatory dismissal of pre-trial investigations due to the lapse of time limits of pre-trial investigation after notice of suspicion.

The report also states that a provision of the CPC on the mandatory closure of pre-trial investigations due to the expiration of the terms of the pre-trial investigation after serving a person with a suspicion notice should be removed, as well as that it should be for the court to decide whether the expiration of the terms of the pre-trial investigation violates the rights of the parties to the case or not. We have repeatedly insisted on such a review of the CPC of Ukraine and are pleased to find this opinion in the IMF Memorandum.

In addition, the Memorandum mentions other important public administration reforms that will improve Ukraine’s anti-corruption capabilities. In particular, the text refers to the need to enact legislation to enhance the independence of the Accounting Chamber of Ukraine. 

To this end, by late December 2024, a relevant law must be adopted, which will cover the strengthening of the selection process for members of the Accounting Chamber, the introduction of an open, transparent, reliable, and competitive procedure, and the empowerment of the institution to carry out the external audit function of all public funds. Moreover, this law will allow the Accounting Chamber to select the scope of the audit free from any direction or interference and to have full and timely access to all relevant information and databases to perform its audit functions.

To summarize, in general, the IMF notes Ukraine’s progress and sees a very specific way to further enhance our capacity. All these steps would have been useful for us in times of peace, whereas in wartime, they are a necessary component that will give us the strength not only to survive, but also to have the resources to resist the enemy and recover after the victory.