As Ukrainians welcome the year 2020, their country will immediately experience several significant political reforms and economic developments.
Starting on Jan. 1, key parliamentary and electoral reforms passed in 2019 come into force. Meanwhile, the country will benefit from a new gas transit agreement reached with Russia just a day earlier and start the year with an increasingly strong currency.
Some of the changes are the result of long-fought political victories. Others come from political compromises or difficult-to-predict economic trends. Regardless, they will be put to the test in 2020.
Parliament
With the arrival of the new year, Ukrainian lawmakers will no longer have immunity from prosecution, a perk that has allowed corrupt figures to legally protect themselves by getting elected to parliament.
The current Ukrainian parliament, dominated by President Volodymyr Zelensky’s Servant of the People party, voted to amend the constitution and lift parliamentary immunity in a marathon legislative session on Sept. 3. The change was scheduled to come into force on Jan. 1, 2020.
Ukrainian politicians had promised to lift parliamentary immunity for over two decades.
Previously, for a lawmaker the prosecuted, the parliament would have to vote to lift his or her immunity. Thus, the Sept. 3 constitutional change removed a key political barrier to prosecution.
However, on Dec. 18, the parliament passed another law stipulating that only the prosecutor general can launch an investigation into a lawmaker. Because the prosecutor general is often a political figure controlled by the president, experts and critics believe this second law will make it harder to prosecute lawmakers.
A loss of immunity isn’t the only change for lawmakers. Starting on Jan. 1, Ukraine will also elect lawmakers through a new system based upon proportional representation and open party lists.
On Dec. 19, the parliament passed a new electoral code. Just over a week later, Zelensky signed it into law.
Read more: Parliament adopts Electoral Code with new voting rules
The new code eliminates Ukraine’s controversial single-member districts in parliamentary elections. Previously, half of the lawmakers were elected on party lists, while the other half was elected through single-member districts. Critics allege that these districts allow candidates to bribe voters for their support.
Now, all lawmakers will be elected through open party lists — meaning that candidates can potentially rise up the list if they receive enough support from voters. Reformers have long demanded the introduction of this system.
Under the new code, single-member districts will continue to be used in local elections.
Energy changes
In the early morning hours of Dec. 31, Ukrainian state oil and gas company Naftogaz signed a new gas transit agreement with its Russian counterpart, Gazprom.
The deal came in the nick of time. The previous agreement was scheduled to expire that very day.
Just one day later, that agreement is already in effect. On Jan. 1, Operator GTS Ukrainy — the new state entity that operates Ukraine’s gas transportation system — announced on Facebook that it had shipped the first cubic meters of Russian gas to the European Union under the new gas transit contract.
Operator GTS Ukrainy was registered in 2019 and, starting on Jan. 1, replaced Ukrtransgaz as the operator of the country’s gas transportation system, the Hromadske news site reported. The company’s creation was a final step toward unbundling the state gas production company from its distribution network — a requirement of the European Union’s Third Energy Package.
Read more: Ukraine’s Naftogaz signs long-awaited gas transit deal with Russia
Additionally, starting from Jan. 1, Ukrainians are supposed to start paying the market price of gas, according to the country’s agreement with the International Monetary Fund.
However, the government has implemented a fixed “guaranteed” price to protect consumers from fluctuations in the market price. Consumers will now have the option to either pay the market price or the guaranteed price.
Currently, the guaranteed price is Hr 6,962 ($292) per 1,000 cubic meters of gas plus the price of transport.
However, after Naftogaz signed the transit agreement with Gazprom, the market price of gas could actually prove to be lower than the guaranteed price, Energy Minister Oleksiy Orzhel said, according to the Ekonomichna Pravda news site.
The IMF has repeatedly demanded that Ukraine raise gas prices to market levels for household consumers, an unpopular measure that politicians long resisted.
Previously, household consumers purchased gas for a subsidized price, an arrangement that distorted the market and created avenues for the corrupt sale of subsidized gas to industrial and commercial consumers, who were already required to pay market prices.
Read more: In Ukraine, gas is even sold to people who don’t exist
Financial changes
Ukraine will also start 2020 with something new: an unusually strong currency. During 2019, the Ukrainian hryvnia appreciated by 16.9% compared to the U.S. dollar, the Ekonomichna Pravda news site reported, citing data from the National Bank of Ukraine.
One year ago, $1 was worth Hr 27.69. Today, it is worth Hr 23.68.
The appreciating hryvnia has defied all predictions and placed downward pressure on inflation, allowing the National Bank of Ukraine to achieve its goal of having 5% inflation by the end of 2019. In response, the central bank cut the interest rate from 15.5% to 13.5% in December.
Read more: Surprisingly strong economy prompts central bank to lower interest rate
However, a strong hryvnia is not a universally positive development. It harms Ukraine’s exports and undermines the country’s budget, which was based upon a projected exchange rate of Hr 28.2 per dollar. That means that tax revenue has fallen short of projections by Hr 39 billion ($1.6 billion), the Bloomberg news site reported.
In 2020, the minimum wage will also rise to Hr 4,723 ($200), an increase of Hr 550 ($23). However, the so-called “subsistence minimum” — supposedly a measure of the minimum amount of income a person needs to survive — will remain at a meager Hr 2,012 ($88) a month until July. This year, it is scheduled to be increased twice, reaching Hr 2,197 in July and Hr 2,270 in December.
No more alcohol monopoly
On Dec. 11, Zelensky signed a law abolishing state-owned firm UkrSpyrt’s monopoly on producing ethanol alcohol. It came into effect on Dec. 1.
UkrSpyrt has been plagued with corruption for years and has long been seen as one of the least efficient companies in Ukraine. Beyond corruption, it has tax problems, outdated equipment, and low-quality products.
Proceeds from the sale of UkrSpyrts factories bring Ukraine up to Hr 5 billion ($210 million) in revenue.
Besides abolishing UkrSpyrt’s monopoly, the law also legalizes the export of ethanol alcohol from Ukraine and allows any licensed company to produce alcohol.
Read more: Zelensky signs law to privatize state-owned alcohol monopoly UkrSpyrt
