New Ukraine government needs to act fast on reforms: EBRD

LONDON (Reuters) - Ukraine’s new-look government needs to prove itself quickly following the departure of a number of key Western-backed reformers last month, a top official from the European Bank for Reconstruction and Development said on Tuesday.

Ukrainian President Petro Poroshenko (L) speaks with Prime Minister Volodymyr Groysman after a ceremony commemorating the 71st anniversary of the end of the World War Two, at the Tomb of the Unknown Soldier in Kiev, Ukraine, May 9, 2016. REUTERS/Gleb Garanich

The EBRD, along with the International Monetary Fund, is one of the only sources of funding for Ukraine at present. It has pumped about 1 billion euros annually into the ex-Soviet republic over the last two years.

A big shake-up in Kiev last month saw President Petro Poroshenko bring in former parliamentary speaker Volodymyr Groysman as prime minister and Oleksandr Danylyuk as finance minister to replace investor-friendly Natalie Jaresko.

“This government has the benefit of the doubt but not the luxury of time,” Francis Malige, the EBRD’s Managing Director for Eastern Europe and the Caucasus told the Reuters Global Markets Forum, adding there was still a huge reform task ahead.

Malige also said the EBRD could take a 15-25 percent stake in the privatization of Ukraine’s largest chemical producer, the Odessa Port Chemical Plant (OPZ), in an auction that could come as early as next month.

“A number of people interested have come to see us and we are talking to them,” said Malige.

The EBRD may also advise Kiev on the process of separating the pipeline business of state-run energy firm Naftogaz from the rest of the company.

That would be another milestone for Ukraine, which is struggling to shake off the grip of vested interests and corruption in the country.

“Naftogaz used to be one of the darkest corners of the Ukrainian economy. This is a revolution,” Malige said.

Another key issue for Malige is the drawn-out process of appointing a new prosecutor-general in Ukraine, a position that decides whether to prosecute politicians and other high-profile individuals.

“What we need there is firm, resolute and quick action from authorities, starting from the top, to move quickly on appointing a prosecutor-general who is respected and who does the job,” said Malige.

The combination of such issues, as well as other difficulties such as organising fair tendering processes and governance, has meant that 2 billion euros of already-earmarked EBRD money for Ukraine remains unspent.

Malige said he hoped gradual progress would be made in putting that money to work but acknowledged this year’s spending may struggle to reach the 1 billion euro levels of recent years.

“The second half of the year is stronger for us so it is still early days,” he added.

Additional reporting by Kirsten Donovan; Editing by Gareth Jones