Development Policy Loan 2 (DPL 2)

The Second Development Policy Loan (DPL-II) supported priority reforms in social and economic spheres as reflected in a series of successive Government programs. This operation was designed by the Government of Ukraine prior to the parliamentary elections of September 30, 2007. It contains a set of objectives and priorities that display significant continuity with earlier government programs and which are likely to remain focus areas for any incoming administration. Indeed, Ukraine#s basic economic development vision is shared across the political spectrum and includes the growing integration with Europe and the adoption of its institutional framework for the regulation of markets, a strong emphasis on social services and inclusion, and efforts to boost Ukraine#s competitiveness on international markets. This development vision is concretized in the program supported by the DPL series in three pillars: (i) improving the investment climate to sustain growth, (ii) creating fiscal space for growth through strengthened public finances and public sector reforms; and (iii) improving service delivery and social inclusion. DPL-II supported the completion of around two thirds of the envisaged measures as well as the achievement (in several areas over-achievement) of the associated medium-term outcome indicators. Improving the investment climate: The Government of Ukraine plans persist in its efforts to improve the business climate focusing on deregulation, inspections reform and the reform of standardization, as well as further customs reforms. Private investment is to be attracted through a new law on Private Public Partnerships and through the adoption of a Law on Joint Stock Companies consistent with OECD principles of good corporate governance. Financial sector regulation is also planned to be strengthened and efforts to improve the financial sustainability of the energy sector and increase its attractiveness for private investment are to be continued. Creating fiscal space for growth: The authorities plan a series of measures to improve the efficiency of the public sector, including tax reform, improvements in tax administration, a new law on public procurement in accordance with international good practice, further improvements in the management and oversight of state-owned enterprises, improved capital budgeting and simplified inter-government fiscal transfers, as well as maintaining an overall ceiling on the fiscal deficit of no more than 3 percent. Improving service delivery and social inclusion: Planned reforms in this area are centered around the increase in the efficiency of spending in health and education as the key to improved service delivery, in particular by revising norms to allow rationalization of facilities and staff and create room for greater investment. Social insurance contributions are also planned to be unified to reduce compliance costs.