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Ambitious Reforms for Stronger Economic Growth in Ukraine

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Economic growth in Ukraine picked up to 3.6 percent in the first half of 2019 and 4.2 percent in the third quarter driven by a strong agricultural harvest and consumption growth from higher wages, remittances, and a resumption of consumer lending, according to the World Bank’s latest Ukraine Economic Update. At the same time, investment growth has not yet picked up to levels needed for stronger and sustained economic growth.

“Delivering on the ambitious reform agenda of the new government to boost investment and economic growth will help create jobs and improve living standards,” said Satu Kahkonen, World Bank Country Director for Belarus, Moldova and Ukraine. “The key reforms include establishing a transparent and efficient agricultural land market, demonopolizing the gas sector through ownership unbundling of Naftogas, and increasing the efficiency of bank lending to the private sector by reducing non-performing loans in state-owned banks.”

If the key reforms move forward expeditiously, economic growth is projected at 3.6 percent in 2019, 3.7 percent in 2020, and 4.2 percent in 2021.

Sound fiscal and monetary management, including efforts to keep current public expenditures under control, are helping reduce public debt, inflation, and interest rates in 2019. Public and publicly guaranteed debt is projected to decline to 52 percent in 2019 from a peak of 81 percent in 2016. Inflation declined to 6.5 percent in October 2019 from 9.8 percent at end-2018, which has allowed the National Bank of Ukraine to reduce the key policy rate to 15.5 percent in October from 18 percent in April.

Continuing the prudent fiscal management going forward by addressing expenditure pressures from wages and social benefits will be important to further reduce inflation and interest rates and support stronger economic growth and higher living standards.

It will also be important to mobilize adequate external financing to meet significant public debt repayments in 2019-2021.

Establishing a land market for agricultural growth

According to the World Bank’s Special Focus Note, lifting the moratorium on agricultural land sales and establishing a transparent and efficient market for agricultural land has the potential to boost economic growth in Ukraine by 0.5 to 1.5 percent per year over a 5-year period.

Ukraine has the largest endowment of arable land in Europe, but agricultural productivity in Ukraine is a fraction of that in other European countries.

The moratorium on agriculture land sales is a major impediment to attracting investment and unlocking productivity in agriculture. The moratorium undermines the security of land tenure and incentives to undertake productivity enhancing investments such as irrigation, move into higher value-added crops, and adopt new technologies.

“The Draft Land Turnover Law passed the first reading in Rada last week in an important breakthrough,” said Faruk Khan, World Bank Lead Economist for Belarus, Moldova, and Ukraine. “Enactment of the land turnover law, along with complementary legislation needed to safeguard transparency and efficiency, will be a major milestone in strengthening Ukraine’s growth prospects going forward.

Access to financing for small, credit-constrained farmers will be important to enable them to participate in the market and improve their productivity.  Financing instruments should be effective and sustainable, which means targeting them to small farmers and designing them in a manner that provides incentives to improve productivity and adopt higher value-added crops and new technologies, at an affordable fiscal cost.

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More research needed into COVID-19 effects on children

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Students at a primary school in Phnom Penh, Cambodia, on the second day after their school reopened. The students, teachers and school administrators wear masks while at the school and maintain physical distancing. UNICEF/Seyha Lychheang

More research is needed into factors that increase the risk of severe COVID-19 disease among children and adolescents, the head of the UN World Health Organization (WHO) has said, adding that while children may have largely been spared many of the most severe effects, they have suffered in other ways. 

Joining the heads of the UN Children’s Fund (UNICEF) and the UN Educational, Scientific and Cultural Organization (UNESCO), at a press conference on Tuesday, WHO Director-General Tedros Adhanom Ghebreyesus outlined that since the start of the COVID pandemic, understanding its effects on children has been a priority.  

“Nine months into the pandemic, many questions remain, but we are starting to have a clearer picture. We know that children and adolescents can be infected and can infect others”, he said. 

“We know that this virus can kill children, but that children tend to have a milder infection and there are very few severe cases and deaths from COVID-19 among children and adolescents.” 

According to WHO data, less than 10 per cent of reported cases and less than 0.2 per cent of deaths are in people under the age of 20. However, additional research is needed into the factors that put children and adolescents at an increased risk. 

In addition, the potential long-term health effects in those who have been infected remains unknown. 

Referring to closure of schools around the world, which has hit millions of children, impacting not only their education but also a range of other important services, the WHO Director-General said that the decision to close schools should be a last resort, temporary and only at a local level in areas with intense transmission. 

Keeping classrooms open, ‘a job for all of us’

The time during which schools are closed should be used for putting in place measures to prevent and respond to transmission when schools reopen. 

“Keeping children safe and at school is not a job for schools alone, or governments alone or families alone. It’s a job for all of us, working together,” added Mr. Tedros. 

“With the right combination of measures, we can keep our kids safe and teach them that health and education are two of the most precious commodities in life,” he added. 

Guidance on reopening schools, while keeping children and communities safe 

Although children have largely been spared many of the most severe health effects of the virus, they have suffered in other ways, said Director-General Tedros, adding that closure of schools hit millions of children globally. 

Given different situations among countries: some, where schools have opened and others, where they have not, UNESCO, UNICEF and WHO, issued updated guidance on school-related public health measures in the context of COVID-19.  

Based on latest scientific evidence, the guidance provides practical advice for schools in areas with no cases, sporadic cases, clusters of cases or community transmission.  They were developed with input from the Technical Advisory Group of Experts on Educational Institutions and COVID-19, established by the three UN agencies in June. 

Schools provide critical, diverse services 

Audrey Azoulay, UNESCO Director-General, also highlighted the importance of school, not only for teaching, but also for providing health, protection and – at times – nutrition services. 

“The longer schools remain closed, the more damaging the consequences, especially for children from more disadvantaged backgrounds … therefore, supporting safe reopening of schools must be a priority for us all”, she said. 

In addition to safely reopening schools, attention must focus on ensuring that no one is left behind, Ms. Azoulay added, cautioning that in some countries, children are missing from classes, amid fears that many – especially girls – may not ever return to schools. 

Alongside, ensuring flow of information and adequate communication between teachers, school administrators and families; and defining new rules and protocols, including on roles of and trainings for teachers, managing school schedules, revising learning content, and providing remedial support for learning losses are equally important, she said. 

“When we deal with education, the decisions we make today will impact tomorrow’s world,” said the UNESCO Director-General. 

A global education emergency 

However, with half the global student population still unable to return to schools, and almost a third of the world’s pupils unable to access remote learning, the situation is “nothing short of a global education emergency”, said Henrietta Fore, UNICEF Executive Director. 

“We know that closing schools for prolonged periods of time can have devastating consequences for children,” she added, outlining their increased exposure risk of physical, sexual, or emotional violence. 

The situation is even more concerning given the results from a recent UNICEF survey which found that almost a fourth of the 158 countries questioned, on their school reopening plans, had not set a date to allow schoolchildren back to the classrooms. 

“For the most marginalized, missing out on school – even if only for a few weeks – can lead to negative outcomes that last a lifetime,” warned Ms. Fore. 

She called on governments to prioritize reopening schools, when restrictions are lifted, and to focus on all the things that children need – learning, protection, and physical and mental health – and ensure the best interest of every child is put first. 

And when governments decide to keep schools closed, they must scale up remote learning opportunities for all children, especially the most marginalized.  

“Find innovative ways – including online, TV and radio – to keep children learning, no matter what”, stressed Ms. Fore. 

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World Bank Project to Boost Household Access to Affordable Energy

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Today, the World Bank Board of Directors approved $150 million in financing to improve access to modern energy for households, enterprises, and public institutions in Rwanda and to enhance the efficiency of electricity services. $75 million will be provided as grant funding, and $75 will be provided as a loan.  

Building on the achievement of previous World Bank support to the energy sector, the Rwanda Energy Access and Quality Improvement Project (EAQIP) will advance Rwanda’s progress towards achieving UN Sustainable Development Goal 7 (SDG7) to ensure access to affordable, reliable, sustainable and modern energy for all, while also contributing to the country’s aim of reducing reliance on cooking fuel by 50%.

“The proposed project is well-timed to build on the World Bank’s decade-long support to the Government’s energy sector agenda. It will contribute directly to Rwanda’s push toward universal energy access by 2024 and universal access to clean cooking by 2030”, said Rolande Pryce, World Bank Country Manager for Rwanda. “We are honored to be a long-term partner in this journey.”

Rwanda EAQIP aims to improve electricity access by providing funding for the country’s ongoing program of expanding grid connections for residential, commercial, industrial, and public sector consumers, as well as by providing grants to reduce the costs of off-grid solar home systems. The project will also enhance the availability and efficiency of low-cost renewable energy by restoring capacity at the Ntaruka Hydro-Power Project, reducing voltage fluctuations on transmission lines, and supporting the national smart meter program.

The project includes the World Bank’s largest clean cooking operation in Africa, and the first project co-financed by the recently launched Clean Cooking Fund (CCF), hosted by the World Bank’s Energy Sector Management Assistance Program (ESMAP). The CCF will provide $20 million for clean cooking, with $10 million provided as a grant and $10million extended as a loan. The project targets 2.15 million people, leveraging an additional US$30 million in public and private sector investments. By incentivizing the private sector and improving the enabling environment, the project aims to develop a sustainable market for affordable clean cooking solutions in Rwanda. 

The project is part of the Rwanda Universal Energy Access Program (RUEAP), which coordinates the efforts of development partners supporting the energy sector to contribute to the achievement of the targets set out in the National Strategy for Transformation (2017-24).

“The World Bank is proud to have led the RUEAP on behalf of the development partners, including the French Development Agency (co-financing the EAQIP). The World Bank looks forward to supporting the implementation of the ongoing program and expects to report positive outcomes in the lives of Rwandans” said Norah Kipwola, World Bank Senior Energy Specialist and the project Task Team Leader.

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ILO: Developing countries should invest US$1.2 trillion to guarantee basic social protection

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To guarantee at least basic income security and access to essential health care for all in 2020 alone, developing countries should invest approximately US$1.2 trillion – on average 3.8 per cent of their GDP – says a new ILO policy brief.

Since the onset of the COVID-19 pandemic  the social protection financing gap has increased by approximately 30 per cent according to Financing gaps in social protection: Global estimate and strategies for developing countries in light of the COVID-19 crisis and beyond .

This is the result of the increased need for health-care services and income security for workers who lost their jobs during the lockdown and the reduction of GDP caused by the crisis.

The situation is particularly dire in low-income countries who would need to spend nearly 16 per cent of their GDP to close the gap – around US$80 billion

Regionally, the relative burden of closing the gap is particularly high in Central and Western Asia, Northern Africa and Sub-Saharan Africa (between 8 per cent and 9 per cent of their GDP).

Even before the COVID-19 crisis, the global community was failing to live up to the social protection legal and policy commitments it had made in the wake of the last global catastrophe – the 2008 financial crisis.

Currently, only 45 per cent of the global population is effectively covered by at least one social protection benefit. The remaining population – more than 4 billion people – is completely unprotected.

National and international measures to reduce the economic impact of the COVID-19 crisis have provided short-term financing assistance. Some countries have sought innovative sources to increase the fiscal space for extending social protection, like taxes on the trade of large tech companies, the unitary taxation of multinational companies, taxes on financial transactions or airline tickets. With austerity measures already emerging even with the crisis ongoing, these efforts are more pressing than ever, the study says.

“Low-income countries must invest approximately US$80 billion, nearly 16 per cent of their GDP, to guarantee at least basic income security and access to essential health care to all,” said Shahrashoub Razavi, Director of the ILO’s Social Protection Department. “Domestic resources are not nearly enough. Closing the annual financing gap requires international resources based on global solidarity.”

Mobilization at the international level should complement national efforts, says the ILO. International financial institutions and development cooperation agencies have already introduced several financial packages to help governments of developing countries tackle the various effects of the crisis but more resources are needed to close the financing gap, particularly in low-income countries.

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