Ukraine passes corruption law in bid for more IMF aid

KIEV: Ukraine’s parliament passed a law on Thursday to create a special court to try corruption cases, a key step for the government to secure more Western aid needed to tame a rising sovereign debt burden.

But an hour later, lawmakers voted to sack Finance Minister Oleksandr Danylyuk -- praised by investors for pushing reforms -- after he publicly fell out with the prime minister, potentially casting a cloud over Kiev’s aid negotiations.

The new law is meant to ring-fence court decisions from political pressure or bribery in Ukraine, where entrenched corruption remains a deterrent to foreign investors.

Trusted international experts will help screen the chosen judges.

President Petro Poroshenko called the vote a litmus test for the country’s ability to tackle corruption and, after the law passed, said it was a victory for Ukraine, while Prime Minister Volodymyr Groysman said it would spur economic growth.

"We gave a clear signal to the whole country and international partners that the fight against corruption is intensifying," Groysman said.

But it was not clear whether the law, which has undergone around 2,000 amendments, will satisfy the International Monetary Fund, which supports Ukraine’s economy with a $17.5 billion cash-for-reforms package.

Ukrainian lawmakers said Kiev had brokered a late compromise formula with its foreign backers on how big a veto international experts would have on unsuitable candidates.

Not everyone was convinced, and before the vote a lawmaker even suggested contacting the IMF and the Venice Commission, a watchdog whose advice had been sought, to get live confirmation that the law complied with the IMF.

Danylyuk’s ouster comes at a delicate point in the aid negotiations.

Even if the IMF is happy with the law, the government has yet to fulfill other conditions such as raising gas prices and it may struggle to stick to the IMF’s budget deficit target of 2.5 percent as elections loom next year.

Parliament sacked the finance minister after he made a short speech defending his record and rejecting the characterisation of him as a stooge for Ukraine’s creditors.

"I am not a defender of interests of international organizations, I defend the interests of Ukraine," he said.

Other MPs and Groysman attacked Danylyuk’s track record in office and his behaviour.

After being voted out, the minister shook hands or hugged lawmakers as he left.

Speaking to reporters later, Danylyuk said he hoped the IMF would accept the final version of the corruption court law and that his successor would not be a political figure who would use the ministry as a piggy bank for the elections.

"In reality, the situation in the country is deteriorating and it needs to be recognized," he said.

"The risks are still very high," he said.

Francis Malige, the senior representative for the European Bank for Reconstruction and Development in Kiev, called Danylyuk a great supporter of reforms.

"It is equally important to find a quick replacement for Minister Danylyuk and that whoever succeeds him continues to play a key role in supporting reform, maintaining macroeconomic stability and working with the central bank in steering the country in times that are still volatile," he told Reuters.