IMF Joins Criticism of Ukraine's Fraying Anti-Graft Efforts

(Bloomberg) -- The International Monetary Fund urged Ukraine to end attacks on its anti-graft agencies, joining a growing chorus of criticism of the country’s reform efforts that already includes the U.S. and the European Union.

Ukraine’s government and parliament should safeguard the independence of the National Anti-Corruption Bureau, or NABU, and the Special Anti-Corruption Prosecutor’s Office, the Washington-based lender said Thursday. It called on lawmakers to quickly pass legislation creating an independent anti-graft court, an issue on which President Petro Poroshenko has flip-flopped.

“Fighting corruption is a key demand of the Ukrainian society, is crucial to achieving stronger and equitable growth and is part of the government’s commitment under the program with the IMF,” Managing Director Christine Lagarde said in an emailed statement.

Almost four years after pro-European demonstrators toppled Ukraine’s Russian-backed leader, reforms are fizzling out, transparency activists are under attack and law enforcement agencies are publicly sparring among themselves. The IMF has delayed transfers from a $17.5 billion bailout as the government fails to meet its commitments under the program.

The U.S. and the EU said this week that they’re also concerned about pressure on Ukraine’s anti-corruption bodies. The State Department warned that such actions risk eroding international support for the former Soviet republic.

Anti-Corruption Casualty

Lawmakers on Thursday dismissed Yehor Sobolyev, head of parliament’s committee on preventing corruption. Sobolyev had helped push through legislation on illicit wealth and mandatory electronic assets declarations for officials, a key requirement for EU visa liberalization and foreign financial aid.

“I’ve never had more important and responsible work in my life,” Sobolyev, a member of the opposition Samopomich party, said before the vote. “We created legislation that has fundamental consequences for Ukraine.”

Hugues Mingarelli, head of the EU delegation to Ukraine, expressed concerned over Sobolyev’s dismissal. Sobolyev’s committee did an “impressive job,” he said was quoted by the Interfax-Ukraine news service as saying.

Even so, a bill backed by members of the ruling coalition enabling the assembly to fire the heads of Ukraine’s anti-graft agencies was removed from the agenda overnight. The legislation would bring “irreversible consequences for the fight against corruption,” NABU had warned in a statement.

‘Mounting Pressure’

“The ruling party apparently stepped back under mounting pressure from the West, with the IMF officially joining the U.S. and the EU in warning Ukrainian leadership against weakening the independent anti-corruption institutions,” Kiev-based investment bank Dragon Capital said in an emailed note.

Poroshenko urged parliament to prepare a draft law on the anti-corruption court on Thursday. If he sees no progress on the issue by the start of next week, he said he’d prepare legislation himself.

Parliament also passed a bill extending until 2019 a moratorium on sales of farmland, a ban the IMF has said Ukraine should end. The assembly also granted local companies preferential treatment when they compete in state tenders, a move First Deputy Economy Minister Maksym Nefyodov said will curb transparency and encourage corruption, according to Interfax-Ukraine.

--With assistance from Daryna Krasnolutska

To contact the reporter on this story: Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net.

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andrew Langley, Paul Abelsky

©2017 Bloomberg L.P.