KYIV – Ukraine’s immediate economic crisis has been resolved, but its economy remains fragile and still needs international support. If the new Ukrainian government becomes complacent, the country’s gains could be lost.
Ukraine has come a long way since the 2013-2014 “Euromaidan” uprising. When former President Viktor Yanukovych fled to Russia in February 2014, the Ukrainian economy was in free-fall, contracting by 17% in just two years. Ukraine’s budget and external deficits had already become unsustainable and needed radical restructuring, so Russian aggression was enough to push the economy over the edge.
By the end of 2015, former Ukrainian Prime Minister Arseniy Yatsenyuk had made remarkable progress in sorting out the country’s finances, but only in the areas where he and his technocratic reformers were in charge.
One of the most important areas was the energy sector. Since the early 1990s, Ukrainian oligarchs had profited immensely from buying subsidized gas at low prices and selling it at a marked-up rate. In the last two years, however, the Ukrainian government has standardized energy pricing and eliminated subsidies (which had amounted to 10% of GDP and fueled illicit financial flows).