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Reform
Support Team
Ministry of
Finance of
Ukraine
Report 2017
Strengthening capacity of state institutions to draft and
implement reforms is among key challenges Ukraine has
faced in the recent years. With the help of our international
partners and friends, we were able to bring new people
with new ideas into the state system to develop, promote
and implement changes.
The Reforms Support Team (RST) became this new blood
badly needed in the Finance Ministry. The team contributed
to the key initiatives the Ministry has worked on – public
finance management strategy, tax administration and
customs reforms, state-owned banks strategy, pension
reform and other initiatives.
The new VAT refund system – online electronic register on
the Finance Ministry’s website – is one of the major anticor-
ruption steps made in 2017. It introduced a new transparent
system excluding any opportunities for corruption. The RST
team assisted the Ministry greatly in the launch of this
register among other steps within the reform of the State
Fiscal Service.
We are also working together with our RST team on the draft law on distributed profit tax that
would be introduced instead of the corporate income tax if approved. Ukraine is also
progressing in the implementation of the BEPS minimum standard to fight tax avoidance. The
RST’s input in this process is highly appreciated.
The team has also worked closely with the Ministry to draft a law on the Financial Investigation
Service, which should replace old corrupt tax police. It must become the only agency which
would investigate financial and economic crimes against public interest. This step will decrease
pressure on business by the law-enforcement system and will ensure effective investigation and
prevention of financial and economic crimes.
Pension reform adopted by parliament in 2017 is another key reform for Ukraine’s economic and
financial stability. The Ministry’s RST team assisted greatly in the development of the draft law
searching for ways to decrease Pension fund deficit and to balance out state budget.
The list of crucial initiatives facilitated by the RST continues.
Any reform process involves many stakeholders and requires skills, knowledge and motivation.
The RST members have been of great support to the Ministry and have shown remarkable
results in designing and implementing changes.
Together we are building a foundation for a more prosperous and stronger Ukraine!
Oleksandr Danyliuk,
Minister of Finance of Ukraine
Oleksandr Danyliuk
Minister of Finance of Ukraine
Launching the Reform Support Team with the help of our
international partners was a great solution for advancing
reforms and improving the performance of the Ministry of
Finance of Ukraine.
First of all, I would like to admit the autonomy and initiative
of the Project Managers, as well as their professional skills
from various fields outside of public sector. This allows RST
members to think out of the box and act as change makers,
helping the Ministry with reforms implementation and
capacity building. The positive effect that RST has on the
Ministry is worth mentioning.
The key reform advocated by the RST is the Public
Administration Reform, which includes the internal
processes improvements within the Ministry of Finance. It
involves a lot of positive changes, in particular, conduction
of a functional review and implementation of the new
organizational structure, introduction of strategic planning,
assure HR improvements, IT capacity building and
implementation of the electronic document flow system, etc.
As a result, the Ministry of Finance shows much better performance in its functions execution
and reforms implementation. It is highly appreciated by government members, our
international partners, foreign and Ukrainian civil society experts. The new RST approach of
project management helps us to optimize our work and not only make deliberate decisions, but
also intensify the advancement of changes in financial sector.
As a project coordinator of the RST from the MoF’s side, I admire those efforts that Project
Managers make on daily basis to improve our Ministry. I am sincerely convinced that Public
Administration Reform and changes inside the Ministry would not have been so successful and
quick without deep involvement of the Reform Support Team.
I thank you for your enormous work and wish you a further inspiration and success. I do believe
that our further achievements will make the Ministry of Finance an ideal example of a Ukrainian
public body with the new quality of administration and results achieved.
Ievgenii Kapinus,
State Secretary
Ministry of Finance of Ukraine
Ievgenii Kapinus
State Secretary
Ministry of Finance of Ukraine
Table of contents
Introduction
Public Administration Reform
Tax Reform
Customs Reform
Financial Investigation Service
Public Finance Management
Social Reform
State-owned Banks
Cooperation with International Financial Institutions
2
4
9
14
18
20
24
27
30
Introduction
During the past four years, Ukraine has undergone significant changes in political and economic
systems. Many successful decisions were made on the way of Ukraine’s post-Euromaidan
reforms.
As we look back on the progress since 2014, it would be fair to say that many systematic
changes were launched thanks to technocrats who came into state bodies. However, Ukrainian
public sector still face a lack of internal capacity to ensure both to cement these changes and
to initiate new ones.
Therefore, it was a very timely and sound decision to create Reform Support Teams (RST) at
pilot Ukrainian ministries at the end of 2016. The philosophy of such projects is to promote
sustainable changes, meaning not performing the operational work of the Ministry, but strategic
reform projects.
The Reform Support Team at the Ministry of Finance of Ukraine (MoF) is funded by the Ukraine
Stabilisation and Sustainable Growth Multi-Donor Account (MDA) managed by the EBRD.
Contributors to the MDA are Denmark, Finland, France, Germany, Italy, Japan, the Netherlands,
Poland, Sweden, Switzerland, the United Kingdom, the United States and the European Union.
A year of the Reform Support Team at the Ministry of Finance functioning proved such
approach both effective and productive. Independent professionals hired by the international
donors have been integrated into the Ministry to provide additional expertise and increase the
Ministry of Finance institutional capacity. This allowed faster implementation of positive
changes in the key reform areas entrusted to the Ministry.
The priority reforms that were defined by the Ministry of Finance senior management in
accordance with the Government’s Action Plan and international commitments of Ukraine are
following: Public Finance Management reform, Public Administration reform, Social reform, Tax
reform, Customs reform, State-owned banks reform and Reform of Cooperation with
International Financial Institutions. The RST has provided hands-on support in the reform
process, including but not limited to design of reforms and technical work. The Ministry of
Finance progress in areas and mentioned RST contribution are highlighted in this annual report.
The reform process in Ukraine does not always go smoothly and quickly enough, there are
many obstacles that arise along the way, but the Reform Support Team will continue to provide
expertise to the Ministry of Finance to carry out positive changes in Ukraine.
Wishing all of us inspiration and courage in our struggle for European Ukraine.
Reform Support Team
Project Management Office
Ministry of Finance of Ukraine
3
The RST MoF Orgchart
RST Director Nataliya Slysh
Senior
Program
Manager
Senior
HR Manager
Administrative
Assistant
Communication
Manager
Communication
Manager
Valeriia
Radchenko
Public
Finance
Management
PAR,
MoF capacity
building
Tax reform;
Establishment of
FinInvestigation
Service
Customs
reform
Optimization
of social
security
system
State-owned
banks reform
and International
Fin. Cooperation
Senior Project
Manager -
Reform
Coordinator
Senior Project
Manager
Project Manager
Oleksandr
Chubukov
Project Manager
/ Analyst
Reform
Coordinator
Yevhen
Mashyna
Senior Project
Manager
Oleksandr
Frantsyshko
Senior Project
Manager
IT
Project
Manager
Reform
Coordinator
Yevhen
Kozlov
Senior Project
Manager
Tax Policy
Project Manager
Dmytro
Kokhan
Project Manager
SFS
Project
Manager
FIS
Project
Manager
Senior Project
Manager
Project Manager
Andriy
Olefirenko
Reform
Coordinator
Kateryna
Bondar
Senior Project
Manager
Valeriy
Markhay
Project Manager
Dmytro
Sydorenko
Senior Project
Manager (IFI)
Andrii
Onoprienko
Senior Project
Manager (SOBs)
Kyrylo
Kabanenko
Senior Project
Manager
(SOBs NPLs)
Senior Project
Manager
(SOBs Lawyer)
Project Manager
/ Analyst
(SOBs)
To be hired Already hired
Public
Administration
Reform
4
Electronic
document
flow
IT
infrastructure
MoF
Capacity
Building
Functional
review
New
organizational
structure
Strategic
planning
HR
improvements
Project
management
Functional review and the new organizational structure
5
RST MoF Report 2017
Impact Key activities involved
The RST participated in the imple-
mentation of a new civil service
concept provided by the SCMU
The RST has helped the MoF to per-
form a functional review of depart-
ments in order to implement the new
concept
The RST was involved in the analysis
of a legislative basis for more than
2 500 MoF functions and drafted
internal regulation
The RST provided suggestions on a
new organizational structure for the
MoF with the implementation of
Directorates General
Increase in efficiency of policy making
procedures at the MoF, improved
legislation preparation flow, quicker
processing of documents and better
control
Clearly defined roles and responsibili-
ties of the MoF’s personnel will lead to
an improvement in business processes
6
RST MoF Report 2017
Strategic planning framework
Impact Key activities involved
The RST has analyzed and prepared
information notes on all strategic
goals of the MoF
The RST was involved in the prepara-
tion of methodological recommenda-
tions for personnel evaluation in line
with strategic and operational goals
of the MoF
The RST has prepared a test version
of the IT tool for strategic goals set-
ting and monitoring and personnel
evaluation
Implementation of the strategic plan-
ning framework at the MoF
Implementation of a new project management concept
Impact Key activities involved
The RST has prepared and approved
with the State Secretary a concept of
the Project management for the MoF
The launch of the pilot project is
planned for 2018
Efficient internal processes reduce
costs and time spendings that leads
to better results when managing
various projects
7
RST MoF Report 2017
HR and internal processes improvements
Impact Key activities involved
The RST drafted questionnaire and
helped the HR department to conduct
an internal personnel survey. After the
survey, the RST helped to prepare an
action plan for implementation of
proposed internal changes (~90% ful-
fillment of short-term actions)
The RST participated in the negotia-
tions on launching personnel trainings
at the MoF
The RST conducted an analysis of the
foreign business trips arrangement
process and proposed suggestions
for improvements
The personnel engagement survey
will help to find out if employees can
see a clear path forward and to receive
feedback on key internal issues
Better strategic planning will help
to set priorities, focus energy and
resources, strengthen operations,
ensure that employees are working
toward common goals
IT infrastructure at the MoF (IT capacity building)
Impact Key activities involved
The RST has helped MoF to increase
existing IT capacity and participated
in identification of the needs to
purchase new IT hardware
The RST has supported MoF in
preparation of the Terms of reference
for PFM Sector IT Audit (World Bank
project)
The RST has participated in prepara-
tion of the preliminary plan for IT
projects at PFM for 2018-2020
The RST has helped MoF in market
research on PFM IT systems solutions
Faster, modern and more secure IT
systems at the MoF, increased data
storage capacity
8
RST MoF Report 2017
Implementation of the electronic document flow system
Impact Key activities involved
The RST has supported the develop-
ment of technical requirements for
the EDMS and helped the MoF with
preparation of tender documents
The RST has prepared template
answers for incoming documents,
which will be included in the electronic
document system flow and used by
the MoF to save time when preparing
standard responses
The RST participating in the EDMS
implementation process
Transition from a heavy paper-based
document flow within the MoF to an
efficient paperless system, this will
reduce costs and time spent for docu-
ment processing and will improve
communication among the MoF
departments
Implementation of the electronic
document flow system in the MoF will
save approximately 40% of time
spent on document processing, which
means saving approximately in total
33 221 working hours annually for all
MoF employees
Issuing tax clarifications
for business
Introduction of the
distributed profit tax
Implementation of BEPS
Improvement of the
taxation of Ukraine
government bonds
New VAT refund register
Upgrade of the
VAT electronic
administration
system
Changes in SFS
structure
Introduction of KPIs
for SFS
9
Tax
code
Value added
tax
State Fiscal
Service
Tax
Reform
10
RST MoF Report 2017
Changes to the Tax Code
Impact Key activities involved
The RST was involved in the prepara-
tion and analysis of draft laws that
were adopted on December 20, 2016
and December 7, 2017
An improved procedure for consi-
deration of tax disputes, introduced a
single register of tax consultations,
enhanced electronic cabinet for tax-
payers will lead to simplification of
the tax administration
In 2017 Ukraine moved up 41 positions
in the Global Paying Taxes Index (now
– sitting in 43rd place)
A new VAT refund register
Impact Key activities involved
The RST has helped to prepare a de-
tailed step-plan on introduction of a
new VAT refund register
On April 1, 2017, a new VAT refund
register was successfully launched
Enhanced transparency of VAT re-
funds
Simplification and clarification of tax
legislation for business leads to a de-
crease in time for business to obtain a
VAT refund from the average of 28.2
weeks to 5-15 weeks
11
RST MoF Report 2017
VAT administration system
Impact Key activities involved
The RST has proposed the amend-
ments to the CMU Decree on the
electronic administration of VAT to
avoid such errors
An error was identified in the work of
the Ukrainian VAT administration sys-
tem “CEO VAT” operated by the State
Fiscal Service, when a taxpayer makes
a set-off of VAT credit with previous
period VAT due
Issuing tax clarifications (tax rulings) for business
Impact Key activities involved
The RST drafted tax rulings and
helped to prepare regulations of the
issuance of tax rulings and establish-
ment of corresponding Expert Council
Tax rulings will minimize risks in dif-
ferent interpretation of tax rules by
taxpayers and tax authorities. Thus,
tax administration becomes clearer
for business
12
RST MoF Report 2017
Improvement of the taxation of Ukraine government bonds
Impact Key activities involved
The RST has prepared draft of the law
in respect of taxation of Ukraine
government bonds
The draft of the law was passed by the
Parliament in September 2017
Optimization of the taxation of
government bonds allowed Ukraine to
raise $3 billion additional funding
through first sovereign bond issue
since restructuring state debt in 2015
Introduction of the distributed profit tax
Impact Key activities involved
First MoF concept for the introduction
of a distributed profit tax was pre-
pared by the RST
The RST participated and held more
than 20 meetings of the Working
Group on development of the draft
law
Introduction of distributed profit tax
instead of a corporate profit tax in
order to stimulate investments
Simplification of the tax administra-
tion and minimization of the possibili-
ty of unlawful claims by the tax
authorities
Implementation of BEPS
Impact Key activities involved
The RST has prepared a Multilateral In-
strument Protocol approved by the CMU
The RST has sent it for review to the
OECD and the World Bank and dis-
cussed a draft of the law on imple-
mentation of other BEPS actions
Implementation of BEPS (Base Ero-
sion and Profit Shifting) implies a
fight against aggressive tax avoidance
strategies that exploit gaps and mis-
matches in tax rules to artificially shift
profits to low or no-tax jurisdictions
13
RST MoF Report 2017
Implementation of PAR in SFS (changes in SFS structure)
Impact Key activities involved
The RST has helped to prepare an
action plan for transfer of SFS
employees from local to regional tax
authorities
The RST participated in development
of a concept and action plan for SFS
mid-term reform (tax and customs
stream)
More efficient SFS structure: reduced
costs and a decrease on the possibili-
ty for unreasonable pressure on busi-
ness
Introduction of KPIs for SFS
Impact Key activities involved
A list of relevant and measurable KPI's
was prepared by the MoF with sup-
port from the RST
Implementation of control for effi-
ciency of how tax authorities work
Simplification of the tax returns and reporting procedures
Impact Key activities involved
The RST has prepared Terms of
Reference and agreed on a scope of
work for external advisor engagement
Simplification of the tax system and
reporting procedures will positively
affect the country’s business climate
14
Customs
Reform
New
Concept
of Customs
reform
Action Plan
for the reform
implementation
Simplification of
customs procedures
Improvement of
a transit system
Harmonization
with EU legislation
Development of the Customs Reform concept
15
RST MoF Report 2017
Impact Key activities involved
The RST has contributed to the
Customs reform by analyzing the
global best practices in customs
procedures and by providing recom-
mendations to the draft of the reform
concept
The Cabinet of Ministers approved the
Concept of Customs reform on March
29, 2017
Implementation of the world best
practices regarding customs process-
es will lead to anti-corruption and im-
plementation facilitated procedures in
customs clearance of goods, namely:
EU Customs Blueprints
WCO SAFE Framework
of Standards
The WTO Trade Facilitation
Agreement
16
RST MoF Report 2017
Development of the Action Plan for the Customs Reform
Impact Key activities involved
The RST participated in developing of
the Action Plan for implementation of
the Concept of Customs Reform
The finalized draft of the Action Plan
with defined tasks, stakeholders, and
deadlines was developed and pub-
lished on the MoF website
The RST has developed an overall
description, presentation materials,
timelines and roadmap for the
Customs reform based on the Action
Plan
The detailed Action Plan establishes a
framework for further implementation
of the Customs Reform
New architecture for customs
administration:
Simplification of customs procedures
Impact Key activities involved
The RST participated in development
of the draft law on changes to the
Customs Code of Ukraine regarding
the taxation specifics for import
operations (transfer) of goods into
the customs territory of Ukraine by
individuals
The RST participated in meetings and
consultations on the issue of introduc-
tion of a "single window” at customs
On November 22, 2017 the Cabinet of
Ministers approved the introduction
of mandatory exchange of informa-
tion at customs on the principle of a
"single window" from February 1, 2018
Simplified customs procedures will
allow for minimization of costs, data
and documentation requirements and
the time needed to complete customs
and other border formalities
HR strategy (motivation and
controlling measures, measures
to enhance staff’s professional skills)
efficiency of IT and infrastructure/
equipment maintenance
cost efficiency by simplifying
reliable transactions and focusing
resources on risky transactions
17
RST MoF Report 2017
Improvement of a transit system
Impact Key activities involved
The RST leads the process of develop-
ment of the draft law on implementa-
tion provisions of the Convention on a
Common Transit Procedure
The RST supported the preparation
of draft laws, comparative tables,
explanatory notes for improving
Ukrainian legislation, which regulates
the temporary importation of vehicles
into Ukraine or their transit through
the country, within the requirements
of European Union legislation and in-
ternational treaties of Ukraine
New transit procedures according to
the Convention on a Common Transit
Procedure and the New Computerised
Transit System (NCTS)
Increased efficiency of controlling
procedures for transited goods:
Harmonization of the Ukrainian legislation with the EU
Impact Key activities involved
The RST supported the MoF in per-
forming assessment of the scope of
the EU legislation that needs to be
harmonized
The RST contributed to development
of the draft law on changes to the
Customs Code regarding implemen-
tation of the Council Regulation (EC)
No 1186/2009 setting-up a Community
system of relief from customs duties
The draft law regarding Authorized
Economic Operator has been develo-
ped with the help of the RST and
submitted to the Parliament
Harmonization of the Ukrainian legis-
lation with EU and WCO guidelines
Implementation provisions of the EU
Customs Code according to obligations
based on the Association Agreement
between Ukraine and the EU
advance submitted information
with further its risk analysis
before arrival of goods
usage of the IT system
guarantee system
transit simplifications for reliable
companies (authorised consignee,
authorised consignor, compre-
hensive guarantee, etc)
18
Financial
Investigation
Service
FIS
Detection
Termination Investigation
Disclosure
of criminal
offenses
19
RST MoF Report 2017
Establishment of the Financial Investigation Service
Impact Key activities involved
The RST facilitated establishing of the
Financial Investigation Service by par-
ticipating in a preparation of the draft
law. The draft law on the Financial In-
vestigation Service was approved by
the СMU
The RST participated in meetings and
consultations with non-governmental
institutions and organizations on the
key matters of the Financial Investiga-
tion Service establishment
After the draft law on the Financial In-
vestigation Service was approved by
the CMU, the RST was involved in the
process of public discussion of the
draft law
The RST provided legal advice con-
cerning aspects of the Tax militia
liquidation matters
Combating financial crimes via
implementation of best investigation
practices and analytical approaches
Improvement of criminal and tax
legislation by identifying the factors
contributing to the commission of
largescale economic crimes
Once established, the Financial Inves-
tigation Service should remove the
pressure on business and help to
improve the business climate and
decrease the level of the shadow
economy in Ukraine
20
Public
Finance
Management
New Public Finance
Management
Strategy
2017-2020
Action Plan
for the reform
implementation
21
RST MoF Report 2017
The CMU approved the PFM Strategy in February 2017 and the
PFM Action Plan in May 2017
Impact Key activities involved
The RST helped the MoF to draft sec-
tions of the Action Plan for strategy
implementation with regard to tax
system development and perfor-
mance monitoring indicators and co-
ordinate it with key stakeholders
The RST was involved in the analysis
and preparation of materials for pub-
lic presentation and discussions of the
PFM Strategy
The approval of the PFM Strategy is
the beginning of comprehensive pub-
lic finance management reform in
Ukraine. This reform is critical to se-
cure a long-term economic growth
and sustainable development of
Ukraine and to maximize efficiency of
limited public resources
Participation in budgeting process. Budget resolution
Impact Key activities involved
The RST participated in more than
30 consultations between the key
spending units and the MoF regarding
the Budget 2018 indicators and
parameters and their compliance with
the budget resolution 2018-2020
Consultations covered among other
the following PFM-related topics:
Core objectives of the introduction of
budget resolution:
Strategic planning
Program budgeting
Decentralization
Sectoral reforms
The RST was involved in the prepara-
tion of related analytics for MoF senior
management
Increase in the efficiency of
budget expenditure
Guidelines for the setting of line
ministries strategic plans
Parliament engagement at an
early stage of budget planning
Main elements of the medium-term
budget-planning model are:
General ceiling of expenditures
for each year of the medium-term
period
Ceilings of expenditures for the
key spending units, which are
based on reform priorities of the
government
22
RST MoF Report 2017
Improved procedure for financial and fiscal impact
assessment of draft laws
Impact Key activities involved
The RST helped the MoF analyse and
identify the operational bottlenecks in
preparation of financial assessment of
proposed draft laws submitted to the
MoF for approval and review
The RST participated in consultations
on possible amendments to the
existing procedure with MoF
departments, public bodies, NGOs
and other external stakeholders
Transparent procedure for prepara-
tion of draft laws, assessment of draft
laws financial impact on state and
local budgets, economic growth,
employment, and other indicators
Implementation of improved proce-
dures which will increase the quality
of the draft acts prepared, approved,
or analyzed by the MoF
23
RST MoF Report 2017
Fiscal decentralization
Impact Key activities involved
The RST is providing the MoF with a
project management and analytical
support related to the pilot project
implementation. It is expected that
the pilot project will run until the end
of 2018. The results are to be scaled
for a larger number of healthcare
institutions starting from 2019 and for
a longer run (after 2021) it is expected
that the new funding approaches will
cover the whole tertiary and
secondary levels of the healthcare
system in Ukraine
The RST also provided analytic sup-
port related to the other aspects of
the fiscal decentralization reform
Delegation of responsibilities
regarding the education, healthcare
and infrastructure funding to local
levels matched with an increased
resource base
The MoF jointly with the National
Academy of Medical Science and the
Ministry of Healthcare are working on
a pilot project regarding new
approaches to healthcare services
funding in particular, a fee for service
approach in tertiary level of the
healthcare system. It will lead to a
more efficient state budget funds
usage
24
Social
Reform
Fair
conditions
for
retirement
Verification of
social support
Pension
Reform
Raising
social
standards
Reduction
of
fraud
Fair social
support
25
RST MoF Report 2017
Pension Reform
Impact Key activities involved
After the adoption of the new Pension
Law, the RST has provided a full sup-
port in communicating the main re-
form points, provisions and parame-
ters of the Pension Reform
The RST coordinated the process of
the secondary legislation develop-
ment for the Pension Reform imple-
mentation
The RST coordinated calculations of
the Pension Fund revenues and social
contributions for the negotiations
process and reform support from the
IMF
Reduction of the Pension Fund deficit,
update of pensions, and compliance
with the IMF memorandum
A draft law was developed, approved
by the National Reforms Council and
passed by the Parliament. The law
includes update of pensions and
parameters discussed with the IMF
PAR component in the Pension Reform: IT tool
Impact Key activities involved
The RST team got approval for this
project funding via the DFID and the
project was launched. The team of
experts and business analysts was
hired to develop this type of tool
The model development process is in
an active phase and the RST is a key
coordinator in project implementa-
tion and stakeholder management
Strengthening the internal capacity of
the MoF, the Ministry of Social Policy
and the Pension Fund through the de-
velopment of a specialized IT tool to
aggregate all available in Ukraine data
on pensions, and to model various
scenarios for changes to the pension
system and the calculations of
economic impact of such changes
26
RST MoF Report 2017
Verification of the social support
Impact Key activities involved
The RST has helped the MoF to
develop a new concept of social pay-
ment verification, which was approved
and agreed by the Ministry of Social
Policy, the Pension Fund and other
stakeholders in social benefit
administration
The RST participated in the develop-
ment of an analytical platform that
will make the verification process auto-
matic and more transparent, help to
reduce fraud cases in social payments
Reduction of fraud in social pay-
ments, and more efficient budget
spending
Strengthening the MoF’s ability for
high-quality verification of social
assistance
State-owned
Banks
27
Effective
cooperation
Create and
implement
monitoring
system
to control
SOB‘s
performance
Strategic
reform
Elaborate
and sign into
power updated
Principles of
State Banking
Sector Strategic
Reforms
Corporate
governance
reform
Change the
Corporate
Governance
model
in SOBs
NPL resolution
in SOBs
Design the
recommendations
for SOBs how to
resolve NPLs
and draft of
amendments
to the legislation
Privatization
of SOBs
Support of
privatization
process on
strategic and
operational
levels
28
RST MoF Report 2017
Strategy of State-owned Banks (SOBs)
Impact Key activities involved
The RST was involved in an analytical
examination related to international
experience in state ownership policy
in the banking sector
The RST was involved in the
development and preparation of a
new reporting within the framework
of obligations to IFIs and performed
an analysis of input data provided by
SOB
Implementation of a commercial
based strategy of the SOB will result
in a decrease in risks for the state, im-
proving the SOB’s financial standing,
raising SOB investment attractive-
ness, and creating opportunities for
SOB privatization in the future
29
RST MoF Report 2017
Design of amendments to the “Principles of State Banking
Sector Strategic Reforms”
Impact Key activities involved
The RST helped the MoF to develop
draft amendments to the Article 7 of
the law "On Banks and Banking”
The RST provided ‘as is’ and ‘to be’
model presentations
The RST participated in a working
group of the relevant parliament com-
mittee on the draft law, which is to
change the principles of Supervisory
Boards election and operation in the
SOB, and provided the MoF with an
assessment on the draft law regarding
specific requirements to Supervisor
Board members
On September 27, 2017 the CMU
approved the draft law of Ukraine "On
Amendments to Certain Legislative
Acts of Ukraine regarding the Pecu-
liarities of Corporate governance of
State Banks“ to ensure establishing
Independent Supervisory Boards in
the banks with state substantial
shareholding. It is a key to further re-
forms of the SOB and allows attracting
IFIs as co-investors
Establishment of the Public Asset Resolution Company (PARС)
Impact Key activities involved
The RST has analyzed best practices
in establishment of the PARC, and co-
ordinated the development of a re-
form concept with the MoF, the NBU,
the Parliament committee and inter-
national experts
The RST participated in working
groups on developing of the draft law
on the PARC’s establishment and con-
ducted a series of working meetings
between Swedish consultants, NBU,
JICA and WB to discuss further PARC
implementation
PARC will help to deprive the banking
system of bad debts (NPL portfolio),
thus bringing back liquidity to banks
and decreasing pressure on bank
equity. This will bring the opportunity
for banks to issue new loans which
will drive economic recovery, stimulate
economic growth and domestic de-
mand
PARC is expected to recover up to
20-25% of NPLs
30
Cooperation with
International
Financial
Institutions
Improved
cooperation
with IFIs
A new IFIs Register
Better
administration of
projects supported
by IFIs
Upgrade of the
International Financial
Cooperation Projects
Office
31
RST MoF Report 2017
Reform of the International Financial Cooperation
Projects Office (AIFCP)
Impact Key activities involved
The RST helped to analyze and pre-
pare a list of functions that potentially
could be transferred from the MoF to
the AIFCP Office
The RST supported the AIFCP in new
projects (SME-Investment program in
cooperation with the KSCA; energy
efficiency in cities; EU Support to the
eastern part of Ukraine)
The goal is to expand the scope of the
International Financial Cooperation
Projects Office in order to decrease
the MoF’s workload
PAR component: ensuring synergy in
obtaining and updating of different
MoF unit functions
32
RST MoF Report 2017
The Cabinet of Ministers Resolution #70 dd 2016
Impact Key activities involved
The RST conducted data collection
and analysis of the Cabinet of Minis-
ters Resolution, and other supportive
documents
The RST prepared a review of the
existing process of preparation,
implementation and monitoring of the
projects supported by IFIs within the
MoF
Design, review and approval of the
new process of preparation is
planned, along with implementation
and monitoring of the projects sup-
ported by IFIs within the MoF. It will
bring better service for IFIs and im-
proved process transparency
The law “On State Aid” influenced the
preparation process of projects sup-
ported by IFIs and their expertise by
the Antimonopoly Committee
Improvement and intensification of the cooperation between
the MoF and IFIs
Impact Key activities involved
The RST upgraded an IT-tool for
monitoring IMF task fulfillment by
responsible ministries/officials in the
MoF
The RST participated in meetings and
provided analytical support to the
MoF during working discussions with
IFC and World Bank
The key goal is to change from the
current supply driven approach to a
demand-driven one in cooperation
with IFIs
Respective ministries and loan benefi-
ciaries should be more proactive in
identifying their financial needs and
utilization within current limits. This
requires regular review of projects/
limits utilization within the MoF
33
RST MoF Report 2017
Launching of a new project “IFIs Register”
Impact Key activities involved
The RST has conducted analysis of
available information, processes, in-
structions and other internal manuals,
and drafted all necessary documents
for the establishment of the IFI regis-
ter
The RST helped to prepare a scope of
work and other project related docu-
ments
This project allows for the develop-
ment of a transparent and open
web-based register containing infor-
mation on all IFIs loans. Therefore,
government as well as society will
have better understanding and con-
trol of all loans Ukraine has from IFIs
The IFI register will help to establish
common rules and possibilities for
standardization for the borrowers’ as-
sessment processes and procedures
(including creating of unified forms of
assessment and use of IT-tools)
The RST MoF stay in touch with all stakeholders regarding reforms implementation.
Reform Council Meetings where MoF invites representatives of International Donors and
Embassies are gathered on the regular basis. Meeting participants discuss key MoF
reforms and RST deliverables.
Last Reform Council in May 2017 was heldby Deputy Minister of Finance Yurii Butsa and
RST MoF Director Nataliya Slysh.
RST MoF Report 2017
34
The Reform Support Team at the Ministry of Finance
of Ukraine (MoF) is funded by the Ukraine Stabilisation
and Sustainable Growth Multi-Donor Account (MDA)
managed by the EBRD.
Contributors to the MDA are Denmark, Finland,
France, Germany, Italy, Japan, the Netherlands,
Poland, Sweden, Switzerland, the United Kingdom,
the United States and the European Union.
Reform Support Team at the Ministry of Finance of Ukraine (MoF) | Report 2017

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Reform Support Team at the Ministry of Finance of Ukraine (MoF) | Report 2017

  • 2. Strengthening capacity of state institutions to draft and implement reforms is among key challenges Ukraine has faced in the recent years. With the help of our international partners and friends, we were able to bring new people with new ideas into the state system to develop, promote and implement changes. The Reforms Support Team (RST) became this new blood badly needed in the Finance Ministry. The team contributed to the key initiatives the Ministry has worked on – public finance management strategy, tax administration and customs reforms, state-owned banks strategy, pension reform and other initiatives. The new VAT refund system – online electronic register on the Finance Ministry’s website – is one of the major anticor- ruption steps made in 2017. It introduced a new transparent system excluding any opportunities for corruption. The RST team assisted the Ministry greatly in the launch of this register among other steps within the reform of the State Fiscal Service. We are also working together with our RST team on the draft law on distributed profit tax that would be introduced instead of the corporate income tax if approved. Ukraine is also progressing in the implementation of the BEPS minimum standard to fight tax avoidance. The RST’s input in this process is highly appreciated. The team has also worked closely with the Ministry to draft a law on the Financial Investigation Service, which should replace old corrupt tax police. It must become the only agency which would investigate financial and economic crimes against public interest. This step will decrease pressure on business by the law-enforcement system and will ensure effective investigation and prevention of financial and economic crimes. Pension reform adopted by parliament in 2017 is another key reform for Ukraine’s economic and financial stability. The Ministry’s RST team assisted greatly in the development of the draft law searching for ways to decrease Pension fund deficit and to balance out state budget. The list of crucial initiatives facilitated by the RST continues. Any reform process involves many stakeholders and requires skills, knowledge and motivation. The RST members have been of great support to the Ministry and have shown remarkable results in designing and implementing changes. Together we are building a foundation for a more prosperous and stronger Ukraine! Oleksandr Danyliuk, Minister of Finance of Ukraine Oleksandr Danyliuk Minister of Finance of Ukraine
  • 3. Launching the Reform Support Team with the help of our international partners was a great solution for advancing reforms and improving the performance of the Ministry of Finance of Ukraine. First of all, I would like to admit the autonomy and initiative of the Project Managers, as well as their professional skills from various fields outside of public sector. This allows RST members to think out of the box and act as change makers, helping the Ministry with reforms implementation and capacity building. The positive effect that RST has on the Ministry is worth mentioning. The key reform advocated by the RST is the Public Administration Reform, which includes the internal processes improvements within the Ministry of Finance. It involves a lot of positive changes, in particular, conduction of a functional review and implementation of the new organizational structure, introduction of strategic planning, assure HR improvements, IT capacity building and implementation of the electronic document flow system, etc. As a result, the Ministry of Finance shows much better performance in its functions execution and reforms implementation. It is highly appreciated by government members, our international partners, foreign and Ukrainian civil society experts. The new RST approach of project management helps us to optimize our work and not only make deliberate decisions, but also intensify the advancement of changes in financial sector. As a project coordinator of the RST from the MoF’s side, I admire those efforts that Project Managers make on daily basis to improve our Ministry. I am sincerely convinced that Public Administration Reform and changes inside the Ministry would not have been so successful and quick without deep involvement of the Reform Support Team. I thank you for your enormous work and wish you a further inspiration and success. I do believe that our further achievements will make the Ministry of Finance an ideal example of a Ukrainian public body with the new quality of administration and results achieved. Ievgenii Kapinus, State Secretary Ministry of Finance of Ukraine Ievgenii Kapinus State Secretary Ministry of Finance of Ukraine
  • 4. Table of contents Introduction Public Administration Reform Tax Reform Customs Reform Financial Investigation Service Public Finance Management Social Reform State-owned Banks Cooperation with International Financial Institutions 2 4 9 14 18 20 24 27 30
  • 5. Introduction During the past four years, Ukraine has undergone significant changes in political and economic systems. Many successful decisions were made on the way of Ukraine’s post-Euromaidan reforms. As we look back on the progress since 2014, it would be fair to say that many systematic changes were launched thanks to technocrats who came into state bodies. However, Ukrainian public sector still face a lack of internal capacity to ensure both to cement these changes and to initiate new ones. Therefore, it was a very timely and sound decision to create Reform Support Teams (RST) at pilot Ukrainian ministries at the end of 2016. The philosophy of such projects is to promote sustainable changes, meaning not performing the operational work of the Ministry, but strategic reform projects. The Reform Support Team at the Ministry of Finance of Ukraine (MoF) is funded by the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account (MDA) managed by the EBRD. Contributors to the MDA are Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Poland, Sweden, Switzerland, the United Kingdom, the United States and the European Union. A year of the Reform Support Team at the Ministry of Finance functioning proved such approach both effective and productive. Independent professionals hired by the international donors have been integrated into the Ministry to provide additional expertise and increase the Ministry of Finance institutional capacity. This allowed faster implementation of positive changes in the key reform areas entrusted to the Ministry. The priority reforms that were defined by the Ministry of Finance senior management in accordance with the Government’s Action Plan and international commitments of Ukraine are following: Public Finance Management reform, Public Administration reform, Social reform, Tax reform, Customs reform, State-owned banks reform and Reform of Cooperation with International Financial Institutions. The RST has provided hands-on support in the reform process, including but not limited to design of reforms and technical work. The Ministry of Finance progress in areas and mentioned RST contribution are highlighted in this annual report. The reform process in Ukraine does not always go smoothly and quickly enough, there are many obstacles that arise along the way, but the Reform Support Team will continue to provide expertise to the Ministry of Finance to carry out positive changes in Ukraine. Wishing all of us inspiration and courage in our struggle for European Ukraine. Reform Support Team Project Management Office Ministry of Finance of Ukraine
  • 6. 3 The RST MoF Orgchart RST Director Nataliya Slysh Senior Program Manager Senior HR Manager Administrative Assistant Communication Manager Communication Manager Valeriia Radchenko Public Finance Management PAR, MoF capacity building Tax reform; Establishment of FinInvestigation Service Customs reform Optimization of social security system State-owned banks reform and International Fin. Cooperation Senior Project Manager - Reform Coordinator Senior Project Manager Project Manager Oleksandr Chubukov Project Manager / Analyst Reform Coordinator Yevhen Mashyna Senior Project Manager Oleksandr Frantsyshko Senior Project Manager IT Project Manager Reform Coordinator Yevhen Kozlov Senior Project Manager Tax Policy Project Manager Dmytro Kokhan Project Manager SFS Project Manager FIS Project Manager Senior Project Manager Project Manager Andriy Olefirenko Reform Coordinator Kateryna Bondar Senior Project Manager Valeriy Markhay Project Manager Dmytro Sydorenko Senior Project Manager (IFI) Andrii Onoprienko Senior Project Manager (SOBs) Kyrylo Kabanenko Senior Project Manager (SOBs NPLs) Senior Project Manager (SOBs Lawyer) Project Manager / Analyst (SOBs) To be hired Already hired
  • 8. Functional review and the new organizational structure 5 RST MoF Report 2017 Impact Key activities involved The RST participated in the imple- mentation of a new civil service concept provided by the SCMU The RST has helped the MoF to per- form a functional review of depart- ments in order to implement the new concept The RST was involved in the analysis of a legislative basis for more than 2 500 MoF functions and drafted internal regulation The RST provided suggestions on a new organizational structure for the MoF with the implementation of Directorates General Increase in efficiency of policy making procedures at the MoF, improved legislation preparation flow, quicker processing of documents and better control Clearly defined roles and responsibili- ties of the MoF’s personnel will lead to an improvement in business processes
  • 9. 6 RST MoF Report 2017 Strategic planning framework Impact Key activities involved The RST has analyzed and prepared information notes on all strategic goals of the MoF The RST was involved in the prepara- tion of methodological recommenda- tions for personnel evaluation in line with strategic and operational goals of the MoF The RST has prepared a test version of the IT tool for strategic goals set- ting and monitoring and personnel evaluation Implementation of the strategic plan- ning framework at the MoF Implementation of a new project management concept Impact Key activities involved The RST has prepared and approved with the State Secretary a concept of the Project management for the MoF The launch of the pilot project is planned for 2018 Efficient internal processes reduce costs and time spendings that leads to better results when managing various projects
  • 10. 7 RST MoF Report 2017 HR and internal processes improvements Impact Key activities involved The RST drafted questionnaire and helped the HR department to conduct an internal personnel survey. After the survey, the RST helped to prepare an action plan for implementation of proposed internal changes (~90% ful- fillment of short-term actions) The RST participated in the negotia- tions on launching personnel trainings at the MoF The RST conducted an analysis of the foreign business trips arrangement process and proposed suggestions for improvements The personnel engagement survey will help to find out if employees can see a clear path forward and to receive feedback on key internal issues Better strategic planning will help to set priorities, focus energy and resources, strengthen operations, ensure that employees are working toward common goals IT infrastructure at the MoF (IT capacity building) Impact Key activities involved The RST has helped MoF to increase existing IT capacity and participated in identification of the needs to purchase new IT hardware The RST has supported MoF in preparation of the Terms of reference for PFM Sector IT Audit (World Bank project) The RST has participated in prepara- tion of the preliminary plan for IT projects at PFM for 2018-2020 The RST has helped MoF in market research on PFM IT systems solutions Faster, modern and more secure IT systems at the MoF, increased data storage capacity
  • 11. 8 RST MoF Report 2017 Implementation of the electronic document flow system Impact Key activities involved The RST has supported the develop- ment of technical requirements for the EDMS and helped the MoF with preparation of tender documents The RST has prepared template answers for incoming documents, which will be included in the electronic document system flow and used by the MoF to save time when preparing standard responses The RST participating in the EDMS implementation process Transition from a heavy paper-based document flow within the MoF to an efficient paperless system, this will reduce costs and time spent for docu- ment processing and will improve communication among the MoF departments Implementation of the electronic document flow system in the MoF will save approximately 40% of time spent on document processing, which means saving approximately in total 33 221 working hours annually for all MoF employees
  • 12. Issuing tax clarifications for business Introduction of the distributed profit tax Implementation of BEPS Improvement of the taxation of Ukraine government bonds New VAT refund register Upgrade of the VAT electronic administration system Changes in SFS structure Introduction of KPIs for SFS 9 Tax code Value added tax State Fiscal Service Tax Reform
  • 13. 10 RST MoF Report 2017 Changes to the Tax Code Impact Key activities involved The RST was involved in the prepara- tion and analysis of draft laws that were adopted on December 20, 2016 and December 7, 2017 An improved procedure for consi- deration of tax disputes, introduced a single register of tax consultations, enhanced electronic cabinet for tax- payers will lead to simplification of the tax administration In 2017 Ukraine moved up 41 positions in the Global Paying Taxes Index (now – sitting in 43rd place) A new VAT refund register Impact Key activities involved The RST has helped to prepare a de- tailed step-plan on introduction of a new VAT refund register On April 1, 2017, a new VAT refund register was successfully launched Enhanced transparency of VAT re- funds Simplification and clarification of tax legislation for business leads to a de- crease in time for business to obtain a VAT refund from the average of 28.2 weeks to 5-15 weeks
  • 14. 11 RST MoF Report 2017 VAT administration system Impact Key activities involved The RST has proposed the amend- ments to the CMU Decree on the electronic administration of VAT to avoid such errors An error was identified in the work of the Ukrainian VAT administration sys- tem “CEO VAT” operated by the State Fiscal Service, when a taxpayer makes a set-off of VAT credit with previous period VAT due Issuing tax clarifications (tax rulings) for business Impact Key activities involved The RST drafted tax rulings and helped to prepare regulations of the issuance of tax rulings and establish- ment of corresponding Expert Council Tax rulings will minimize risks in dif- ferent interpretation of tax rules by taxpayers and tax authorities. Thus, tax administration becomes clearer for business
  • 15. 12 RST MoF Report 2017 Improvement of the taxation of Ukraine government bonds Impact Key activities involved The RST has prepared draft of the law in respect of taxation of Ukraine government bonds The draft of the law was passed by the Parliament in September 2017 Optimization of the taxation of government bonds allowed Ukraine to raise $3 billion additional funding through first sovereign bond issue since restructuring state debt in 2015 Introduction of the distributed profit tax Impact Key activities involved First MoF concept for the introduction of a distributed profit tax was pre- pared by the RST The RST participated and held more than 20 meetings of the Working Group on development of the draft law Introduction of distributed profit tax instead of a corporate profit tax in order to stimulate investments Simplification of the tax administra- tion and minimization of the possibili- ty of unlawful claims by the tax authorities Implementation of BEPS Impact Key activities involved The RST has prepared a Multilateral In- strument Protocol approved by the CMU The RST has sent it for review to the OECD and the World Bank and dis- cussed a draft of the law on imple- mentation of other BEPS actions Implementation of BEPS (Base Ero- sion and Profit Shifting) implies a fight against aggressive tax avoidance strategies that exploit gaps and mis- matches in tax rules to artificially shift profits to low or no-tax jurisdictions
  • 16. 13 RST MoF Report 2017 Implementation of PAR in SFS (changes in SFS structure) Impact Key activities involved The RST has helped to prepare an action plan for transfer of SFS employees from local to regional tax authorities The RST participated in development of a concept and action plan for SFS mid-term reform (tax and customs stream) More efficient SFS structure: reduced costs and a decrease on the possibili- ty for unreasonable pressure on busi- ness Introduction of KPIs for SFS Impact Key activities involved A list of relevant and measurable KPI's was prepared by the MoF with sup- port from the RST Implementation of control for effi- ciency of how tax authorities work Simplification of the tax returns and reporting procedures Impact Key activities involved The RST has prepared Terms of Reference and agreed on a scope of work for external advisor engagement Simplification of the tax system and reporting procedures will positively affect the country’s business climate
  • 17. 14 Customs Reform New Concept of Customs reform Action Plan for the reform implementation Simplification of customs procedures Improvement of a transit system Harmonization with EU legislation
  • 18. Development of the Customs Reform concept 15 RST MoF Report 2017 Impact Key activities involved The RST has contributed to the Customs reform by analyzing the global best practices in customs procedures and by providing recom- mendations to the draft of the reform concept The Cabinet of Ministers approved the Concept of Customs reform on March 29, 2017 Implementation of the world best practices regarding customs process- es will lead to anti-corruption and im- plementation facilitated procedures in customs clearance of goods, namely: EU Customs Blueprints WCO SAFE Framework of Standards The WTO Trade Facilitation Agreement
  • 19. 16 RST MoF Report 2017 Development of the Action Plan for the Customs Reform Impact Key activities involved The RST participated in developing of the Action Plan for implementation of the Concept of Customs Reform The finalized draft of the Action Plan with defined tasks, stakeholders, and deadlines was developed and pub- lished on the MoF website The RST has developed an overall description, presentation materials, timelines and roadmap for the Customs reform based on the Action Plan The detailed Action Plan establishes a framework for further implementation of the Customs Reform New architecture for customs administration: Simplification of customs procedures Impact Key activities involved The RST participated in development of the draft law on changes to the Customs Code of Ukraine regarding the taxation specifics for import operations (transfer) of goods into the customs territory of Ukraine by individuals The RST participated in meetings and consultations on the issue of introduc- tion of a "single window” at customs On November 22, 2017 the Cabinet of Ministers approved the introduction of mandatory exchange of informa- tion at customs on the principle of a "single window" from February 1, 2018 Simplified customs procedures will allow for minimization of costs, data and documentation requirements and the time needed to complete customs and other border formalities HR strategy (motivation and controlling measures, measures to enhance staff’s professional skills) efficiency of IT and infrastructure/ equipment maintenance cost efficiency by simplifying reliable transactions and focusing resources on risky transactions
  • 20. 17 RST MoF Report 2017 Improvement of a transit system Impact Key activities involved The RST leads the process of develop- ment of the draft law on implementa- tion provisions of the Convention on a Common Transit Procedure The RST supported the preparation of draft laws, comparative tables, explanatory notes for improving Ukrainian legislation, which regulates the temporary importation of vehicles into Ukraine or their transit through the country, within the requirements of European Union legislation and in- ternational treaties of Ukraine New transit procedures according to the Convention on a Common Transit Procedure and the New Computerised Transit System (NCTS) Increased efficiency of controlling procedures for transited goods: Harmonization of the Ukrainian legislation with the EU Impact Key activities involved The RST supported the MoF in per- forming assessment of the scope of the EU legislation that needs to be harmonized The RST contributed to development of the draft law on changes to the Customs Code regarding implemen- tation of the Council Regulation (EC) No 1186/2009 setting-up a Community system of relief from customs duties The draft law regarding Authorized Economic Operator has been develo- ped with the help of the RST and submitted to the Parliament Harmonization of the Ukrainian legis- lation with EU and WCO guidelines Implementation provisions of the EU Customs Code according to obligations based on the Association Agreement between Ukraine and the EU advance submitted information with further its risk analysis before arrival of goods usage of the IT system guarantee system transit simplifications for reliable companies (authorised consignee, authorised consignor, compre- hensive guarantee, etc)
  • 22. 19 RST MoF Report 2017 Establishment of the Financial Investigation Service Impact Key activities involved The RST facilitated establishing of the Financial Investigation Service by par- ticipating in a preparation of the draft law. The draft law on the Financial In- vestigation Service was approved by the СMU The RST participated in meetings and consultations with non-governmental institutions and organizations on the key matters of the Financial Investiga- tion Service establishment After the draft law on the Financial In- vestigation Service was approved by the CMU, the RST was involved in the process of public discussion of the draft law The RST provided legal advice con- cerning aspects of the Tax militia liquidation matters Combating financial crimes via implementation of best investigation practices and analytical approaches Improvement of criminal and tax legislation by identifying the factors contributing to the commission of largescale economic crimes Once established, the Financial Inves- tigation Service should remove the pressure on business and help to improve the business climate and decrease the level of the shadow economy in Ukraine
  • 24. 21 RST MoF Report 2017 The CMU approved the PFM Strategy in February 2017 and the PFM Action Plan in May 2017 Impact Key activities involved The RST helped the MoF to draft sec- tions of the Action Plan for strategy implementation with regard to tax system development and perfor- mance monitoring indicators and co- ordinate it with key stakeholders The RST was involved in the analysis and preparation of materials for pub- lic presentation and discussions of the PFM Strategy The approval of the PFM Strategy is the beginning of comprehensive pub- lic finance management reform in Ukraine. This reform is critical to se- cure a long-term economic growth and sustainable development of Ukraine and to maximize efficiency of limited public resources Participation in budgeting process. Budget resolution Impact Key activities involved The RST participated in more than 30 consultations between the key spending units and the MoF regarding the Budget 2018 indicators and parameters and their compliance with the budget resolution 2018-2020 Consultations covered among other the following PFM-related topics: Core objectives of the introduction of budget resolution: Strategic planning Program budgeting Decentralization Sectoral reforms The RST was involved in the prepara- tion of related analytics for MoF senior management Increase in the efficiency of budget expenditure Guidelines for the setting of line ministries strategic plans Parliament engagement at an early stage of budget planning Main elements of the medium-term budget-planning model are: General ceiling of expenditures for each year of the medium-term period Ceilings of expenditures for the key spending units, which are based on reform priorities of the government
  • 25. 22 RST MoF Report 2017 Improved procedure for financial and fiscal impact assessment of draft laws Impact Key activities involved The RST helped the MoF analyse and identify the operational bottlenecks in preparation of financial assessment of proposed draft laws submitted to the MoF for approval and review The RST participated in consultations on possible amendments to the existing procedure with MoF departments, public bodies, NGOs and other external stakeholders Transparent procedure for prepara- tion of draft laws, assessment of draft laws financial impact on state and local budgets, economic growth, employment, and other indicators Implementation of improved proce- dures which will increase the quality of the draft acts prepared, approved, or analyzed by the MoF
  • 26. 23 RST MoF Report 2017 Fiscal decentralization Impact Key activities involved The RST is providing the MoF with a project management and analytical support related to the pilot project implementation. It is expected that the pilot project will run until the end of 2018. The results are to be scaled for a larger number of healthcare institutions starting from 2019 and for a longer run (after 2021) it is expected that the new funding approaches will cover the whole tertiary and secondary levels of the healthcare system in Ukraine The RST also provided analytic sup- port related to the other aspects of the fiscal decentralization reform Delegation of responsibilities regarding the education, healthcare and infrastructure funding to local levels matched with an increased resource base The MoF jointly with the National Academy of Medical Science and the Ministry of Healthcare are working on a pilot project regarding new approaches to healthcare services funding in particular, a fee for service approach in tertiary level of the healthcare system. It will lead to a more efficient state budget funds usage
  • 28. 25 RST MoF Report 2017 Pension Reform Impact Key activities involved After the adoption of the new Pension Law, the RST has provided a full sup- port in communicating the main re- form points, provisions and parame- ters of the Pension Reform The RST coordinated the process of the secondary legislation develop- ment for the Pension Reform imple- mentation The RST coordinated calculations of the Pension Fund revenues and social contributions for the negotiations process and reform support from the IMF Reduction of the Pension Fund deficit, update of pensions, and compliance with the IMF memorandum A draft law was developed, approved by the National Reforms Council and passed by the Parliament. The law includes update of pensions and parameters discussed with the IMF PAR component in the Pension Reform: IT tool Impact Key activities involved The RST team got approval for this project funding via the DFID and the project was launched. The team of experts and business analysts was hired to develop this type of tool The model development process is in an active phase and the RST is a key coordinator in project implementa- tion and stakeholder management Strengthening the internal capacity of the MoF, the Ministry of Social Policy and the Pension Fund through the de- velopment of a specialized IT tool to aggregate all available in Ukraine data on pensions, and to model various scenarios for changes to the pension system and the calculations of economic impact of such changes
  • 29. 26 RST MoF Report 2017 Verification of the social support Impact Key activities involved The RST has helped the MoF to develop a new concept of social pay- ment verification, which was approved and agreed by the Ministry of Social Policy, the Pension Fund and other stakeholders in social benefit administration The RST participated in the develop- ment of an analytical platform that will make the verification process auto- matic and more transparent, help to reduce fraud cases in social payments Reduction of fraud in social pay- ments, and more efficient budget spending Strengthening the MoF’s ability for high-quality verification of social assistance
  • 30. State-owned Banks 27 Effective cooperation Create and implement monitoring system to control SOB‘s performance Strategic reform Elaborate and sign into power updated Principles of State Banking Sector Strategic Reforms Corporate governance reform Change the Corporate Governance model in SOBs NPL resolution in SOBs Design the recommendations for SOBs how to resolve NPLs and draft of amendments to the legislation Privatization of SOBs Support of privatization process on strategic and operational levels
  • 31. 28 RST MoF Report 2017 Strategy of State-owned Banks (SOBs) Impact Key activities involved The RST was involved in an analytical examination related to international experience in state ownership policy in the banking sector The RST was involved in the development and preparation of a new reporting within the framework of obligations to IFIs and performed an analysis of input data provided by SOB Implementation of a commercial based strategy of the SOB will result in a decrease in risks for the state, im- proving the SOB’s financial standing, raising SOB investment attractive- ness, and creating opportunities for SOB privatization in the future
  • 32. 29 RST MoF Report 2017 Design of amendments to the “Principles of State Banking Sector Strategic Reforms” Impact Key activities involved The RST helped the MoF to develop draft amendments to the Article 7 of the law "On Banks and Banking” The RST provided ‘as is’ and ‘to be’ model presentations The RST participated in a working group of the relevant parliament com- mittee on the draft law, which is to change the principles of Supervisory Boards election and operation in the SOB, and provided the MoF with an assessment on the draft law regarding specific requirements to Supervisor Board members On September 27, 2017 the CMU approved the draft law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine regarding the Pecu- liarities of Corporate governance of State Banks“ to ensure establishing Independent Supervisory Boards in the banks with state substantial shareholding. It is a key to further re- forms of the SOB and allows attracting IFIs as co-investors Establishment of the Public Asset Resolution Company (PARС) Impact Key activities involved The RST has analyzed best practices in establishment of the PARC, and co- ordinated the development of a re- form concept with the MoF, the NBU, the Parliament committee and inter- national experts The RST participated in working groups on developing of the draft law on the PARC’s establishment and con- ducted a series of working meetings between Swedish consultants, NBU, JICA and WB to discuss further PARC implementation PARC will help to deprive the banking system of bad debts (NPL portfolio), thus bringing back liquidity to banks and decreasing pressure on bank equity. This will bring the opportunity for banks to issue new loans which will drive economic recovery, stimulate economic growth and domestic de- mand PARC is expected to recover up to 20-25% of NPLs
  • 33. 30 Cooperation with International Financial Institutions Improved cooperation with IFIs A new IFIs Register Better administration of projects supported by IFIs Upgrade of the International Financial Cooperation Projects Office
  • 34. 31 RST MoF Report 2017 Reform of the International Financial Cooperation Projects Office (AIFCP) Impact Key activities involved The RST helped to analyze and pre- pare a list of functions that potentially could be transferred from the MoF to the AIFCP Office The RST supported the AIFCP in new projects (SME-Investment program in cooperation with the KSCA; energy efficiency in cities; EU Support to the eastern part of Ukraine) The goal is to expand the scope of the International Financial Cooperation Projects Office in order to decrease the MoF’s workload PAR component: ensuring synergy in obtaining and updating of different MoF unit functions
  • 35. 32 RST MoF Report 2017 The Cabinet of Ministers Resolution #70 dd 2016 Impact Key activities involved The RST conducted data collection and analysis of the Cabinet of Minis- ters Resolution, and other supportive documents The RST prepared a review of the existing process of preparation, implementation and monitoring of the projects supported by IFIs within the MoF Design, review and approval of the new process of preparation is planned, along with implementation and monitoring of the projects sup- ported by IFIs within the MoF. It will bring better service for IFIs and im- proved process transparency The law “On State Aid” influenced the preparation process of projects sup- ported by IFIs and their expertise by the Antimonopoly Committee Improvement and intensification of the cooperation between the MoF and IFIs Impact Key activities involved The RST upgraded an IT-tool for monitoring IMF task fulfillment by responsible ministries/officials in the MoF The RST participated in meetings and provided analytical support to the MoF during working discussions with IFC and World Bank The key goal is to change from the current supply driven approach to a demand-driven one in cooperation with IFIs Respective ministries and loan benefi- ciaries should be more proactive in identifying their financial needs and utilization within current limits. This requires regular review of projects/ limits utilization within the MoF
  • 36. 33 RST MoF Report 2017 Launching of a new project “IFIs Register” Impact Key activities involved The RST has conducted analysis of available information, processes, in- structions and other internal manuals, and drafted all necessary documents for the establishment of the IFI regis- ter The RST helped to prepare a scope of work and other project related docu- ments This project allows for the develop- ment of a transparent and open web-based register containing infor- mation on all IFIs loans. Therefore, government as well as society will have better understanding and con- trol of all loans Ukraine has from IFIs The IFI register will help to establish common rules and possibilities for standardization for the borrowers’ as- sessment processes and procedures (including creating of unified forms of assessment and use of IT-tools)
  • 37. The RST MoF stay in touch with all stakeholders regarding reforms implementation. Reform Council Meetings where MoF invites representatives of International Donors and Embassies are gathered on the regular basis. Meeting participants discuss key MoF reforms and RST deliverables. Last Reform Council in May 2017 was heldby Deputy Minister of Finance Yurii Butsa and RST MoF Director Nataliya Slysh. RST MoF Report 2017 34
  • 38. The Reform Support Team at the Ministry of Finance of Ukraine (MoF) is funded by the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account (MDA) managed by the EBRD. Contributors to the MDA are Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Poland, Sweden, Switzerland, the United Kingdom, the United States and the European Union.