G7 Ministerial and Other Meetings
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Ministerial and Other Meetings

CHAIRMAN'S SUMMARY

Conference on Partnership for Economic Transition in Ukraine
(Winnipeg, Manitoba, Canada, October 27, 1994)

  1. Successful transformation to a stable, market economy in a democratic Ukraine, fully integrated into the global community, is a goal shared by the people of Ukraine with the G-7, Russia, Turkmenistan and all other countries desirous of global peace and prosperity.
  2. As an important step toward realising this common goal, senior officials of the G- 7, the EU, the Ukrainian government and three international financial institutions (IMF, World Bank and EBRD) met on October 27, 1994 in Winnipeg, as envisaged at the Naples Economic Summit, to exchange views on promoting economic reforms in Ukraine. Officials from Russia and Turkmenistan were invited to the conference as major creditors to Ukraine.
  3. The main objective of the Conference was to have an open dialogue on the necessary elements of a comprehensive reform program for Ukraine, as well as practical considerations associated with successful implementation of such a program.
  4. The participants congratulated Ukraine for sound measures that it has already initiated or announced to this end. They warmly welcomed President Kuchma's reaffirmation of his government's commitment to comprehensive economic reform in a keynote speech at the opening session of the Conference. This commitment was elaborated by the Ukrainian officials at the Working Session.
  5. The Ukrainian representative outlined the key elements of their comprehensive agenda for economic reform, reviewing four main areas: macroeconomic stabilisation, economic liberalisation, structural reform and social safety net reform. Participants agreed that full implementation of this initial set of measures would set the Ukrainian economy firmly on the path to stability and renewal.
  6. Macroeconomic Stabilisation: Ukrainian representatives affirmed their plans to implement credit and monetary policies aimed at securing low inflation and a stable exchange rate, and to adopt measures to reduce the budget deficit sharply. Participants agreed that these actions represent a crucial step ion securing credibility and broad-based support for the overall economic reform program and welcomed the priority that Ukraine attaches to their early implementation.
  7. Economic Liberalisation: Ukrainian representatives also described the unification of exchange rates and liberalisation of most prices, and the planned abolition of most export quotas and licences. Participants agreed that these are central requirements of an efficient market economy and noted the importance to Ukraine's future economic prospects of secure access to world export markets.
  8. Structural Reform: Ukrainian representatives further described their program for accelerated privatisation of state enterprises, enforcement of bankruptcy law, fostering private ownership and enterprise, and comprehensive agricultural sector and land reform. Participants agreed that comprehensive structural reform, in particular privatisation and growth in the number of small and medium- sized enterprises, will allow the economy to begin to respond to the market signals emerging from newly liberalised prices, including the price signals coming from international markets. They also noted that economic liberalisation and structural reform would together create a positive climate for private sector investment and open the door to private sector capital from abroad, a prospect which is central to achieving a mature market economy since the potential for such capital flows far exceeds the potential for official assistance. Ever more importantly, participants noted, private capital flows will be accompanied by transfer of technology and know-how to Ukrainian industry that will allow them to compete effectively on world markets. Finally, participants agreed that reform of the energy sector, including more appropriate energy pricing and addressing environmental concerns, was an essential element of the overall reform program and that this would facilitate the implementation of the G-7 Action Plan approved by the Naples Summit. They welcomed President Kuchma's statement in the plenary session that he would seek the timely decommissioning of the Chernobyl nuclear power plant, with the benefit of external finance and technical assistance.
  9. Social Safety Net Reform: Ukrainian representatives and other conference participants also agreed on the critical importance of targeted and compassionate social policies that both respect the governments' fiscal realities and support the transition of Ukrainian workers and their families from a reliance on outmoded industrial structures to productive employment in new private sector firms founded on Ukraine's rich economic potential.

    FINANCIAL ASSISTANCE AND REFORM

  10. All conference participants strongly endorsed the importance of timely international financial assistance to support the ambitious economic reform program on which Ukraine is now embarking. They affirmed the necessity of staged considerartion of this assistance, at a pace to be determined by the speed and scope of economic reforms implemented by Ukraine.
  11. Conference participants noted with satisfaction the fact that the first element of support are being mobilised immediately in response to Ukraine's own early efforts. They noted in particular that very significant financial assistance will be forthcoming in the fourth quarter of 1994 for Ukraine from a broad range of bilateral and multilateral sources. In this context, participants congratulated the Ukrainian representatives on the fact that their reform program is sufficiently comprehensive and ambitious to have merited approval of the first tranche of a Systemic Transformation Facility from the IMF. To complement the initial tranche of about US$371 million provided under the STF agreed to on October 26 by the IMF Executive Board, participants were urged to be forthcoming with balance of payments grants and loans and fast-disbursing export credits. They also noted the willingness of Russia and Turkmenistan to contribute to the fourth quarter financing requirements through regularisation of debt servicing obligations under the conditions provided for in the STF agreement. Participants are looking forward to the implementation of structural reform measures supported by the World Bank which would allow initial disbursement of the Bank's rehabilitation loan in the fourth quarter of this year.
  12. Participants noted, moreover, that resolute implementation of his program and adoption of progressively more comprehensive reform measures would open access to further resources as follows:

    Based on current arrangements, a second tranche of US$371 million could be discussed to Ukraine under the STF, consistent with full implementation of the current reform program.

    In addition, up to US$1.5 billion could be available over a twelve- month period beginning in 1995 from the IMF under a Stand-By Arrangement, conditional on implementation of a commensurately strong and comprehensive reform program. Participants declare their intention to support Ukraine fully in the development of an SBA program, noting key policy requirements that such a step would imply.

    The World Bank and EBRD could commit in excess of US$1.5 billion in project and adjustment loans over the next two years, provided that Ukraine fully respect the policy requirements of the prospective STF and SBA programs, and implements structural reforms supported by the World Bank.

    Additional resources would be available from the IMF if current IMF arrangements were altered to increase the STF amounts from 50% to 85% of quota, and an SDR agreement were reached.

    Participants looked forward to early convening by the World Bank of a Consultative Group meeting to complement the 1995 reform program and likely assistance from multilateral sources, and pledged their governments' continuing support in line with Ukraine's own efforts to improve its circumstances.

    CONCLUSIONS

  13. Ukrainian representatives were very encouraged by the concrete and highly visible support for their reform program that these elements of bilateral and multilateral assistance will provide, and they reaffirmed their government's commitment to reform.
  14. The Conference concluded with general agreement that a solid foundation is taking shape for a genuine partnership between Ukraine and the international community, working together toward a fundamental economic transformation in Ukraine.


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