Following the adoption by the Verkhovna Rada of Ukraine on 14 April 2016 of the Action Program of the Cabinet of Ministers of Ukraine, on 27 May 2016 the Government endorsed a Priority Action Plan of the Government for 2016. Given weak institutional capacity of public administration and grave economic circumstances the Government focused its activity on the most pressing economic issues to ensure that Ukraine's economy will be able restore its steady growth. Action Plan is the result of joint work of the ministries, the public and experts.

Action Plan set five strategic priorities – high level goals, without reaching progress in which it is impossible to ensure the creation of adequate living conditions for the citizens of Ukraine, namely:

macroeconomic stabilization;

creating favorable conditions for business development;

rule of law and combating corruption;

improving the quality of public administration and public services;

restoring security of the state and citizens.

Major reform measures and consistent ways to implement them were directed towards achievement of the above strategic priorities.

This Report presents the implementation status of the Action Plan and key achievements of the Government performance since its appointment.

According to statistics, due to well-balanced policy and implementation of priority reforms the Government contributed to ensuring GDP growth, which exceeded forecasts of Ukrainian experts and international organizations.

In the first quarter of 2016, GDP growth was 0.1 percent compared to the corresponding quarter of the previous year, in the second quarter – 1.4 percent, in the third quarter – 2 percent, and in the fourth quarter of 2016 there was an accelerated GDP growth – 4.7 percent compared to the fourth quarter of 2015. Following the results of 2016 there was a GDP growth at the level of 2.2 percent (calculations are based on quarterly data of the State Statistics Service of Ukraine).

Unlike previous years, the sources of growth are not the external factors but internal ones: investment and consumer demand. At the same time, the negative impact of external factors was reduced to almost nothing. The initiated and structural changes have become an essential factor in improving economic dynamics as well.

The government focused on deregulation of entrepreneurial activity, improvement of business climate, improvement of the public investment and public sector management effectiveness, successful implementation of the EU-Ukraine Association Agreement, in particular with regard to in-depth and comprehensive free trade area, as well as Government's active efforts in the field of foreign trade policy, which enabled most economic agents to successfully go through the adaptation period and adapt to the new conditions of the economy functioning.

Change in GDP, % compared to the corresponding quarter of the previous year

 

In 2016, the Government managed to improve the dynamics of domestic prices in consumer market, despite some relaxation of the National Bank's monetary policy and the growing influence of the administrative component of inflation. At year-end, as expected, the inflation was within the target included in the budget for 2016 – 12.4 percent vs. 43.3 percent in 2015.

Slowdown in inflation makes it possible now to claim sufficient controllability of pricing processes in domestic market and positive impact on long expectations of economic entities.

Changes in consumer prices, % compared to corresponding month of the previous year

An important indicator of perception by economic entities of the new economic reforms was to restoration of confidence in the domestic economy resulting in a decrease in the level of the shadow economy by 5 percentage points constituting the biggest decrease over the years of observations (from 40 percent of GDP at the end of the first 9 months of 2015 to 35 percent for the same period of 2016). In addition, an increase in the number of registered legal entities takes place: according to EDRPOU, as of 1 January 2017 the number of registered legal entities increased by 5.7 percent (compared to 1 January 2016). According to the National Bank, Business Expectation Index in the fourth quarter of 2016 showed one of the highest values over the last two and a half years – 108.7 percent. This has become possible due to respondents' expectations for further growth in sales volumes, investment in equipment and recovery of enterprises.

Increase in confidence, securing macroeconomic stability along with the gradual increase in investment attractiveness of Ukraine enabled an intensification of investment activity after long decline in investments that was observed over a long period – from the fourth quarter of 2012 to the fourth quarter of 2015, thus shaping long-term factors of the country's sustainable development.

For 9 months of 2016, the volumes of assimilated capital investments have increased by 16.4 percent compared to a decrease by 6 percent for 9 months of 2015. Investment demand has been a leader in making a positive contribution to GDP growth at the end of the first 9 months of 2016. Real growth in Gross Fixed Capital Formation (GFCF) at the end of the first 9 months of 2016 was 16.5 percent taking into account the increase over all the three quarters of the year and forming the main component of the cumulative growth in the third quarter of 2016, in which the GFCF growth had the highest dynamics at the level of almost 25 percent since the fourth quarter of 2007.

 

Change in capital investment, % compared to the corresponding period of the previous year

 

As part of commencement of activities aimed at ensuring conditions for fully-fledged functioning of the free trade area and development of trade and economic cooperation under the EU-Ukraine Association Agreement the geographical structure of Ukrainian exports has changed in favor of an increase in exports to EU countries, which has partly offset another loss of CIS markets, including Russian Federation. So, for example, the share of exports of goods to EU countries in 2016, according to preliminary data of the National Bank, has increased up to 31.9 percent compared to 29.5 percent in 2015 with simultaneous increase in volumes by 2.4 percent compared to a decrease by 26.2 percent in 2015. The share of exports to Russian Federation has decreased from 11.9 percent in 2015 to 9.3 percent in 2016 with simultaneous decrease in volumes by 25.8 percent.

As a result of growth of domestic investment and consumer demand, partial compensation and geographical reorientation in foreign trade, an   acceleration of development of any and all types of economic activities of the real economy sector took place in 2016, in particular:

industrial production has increased by 2.4 percent (in particular, under conditions of the restoration of growth of engineering goods production, for the first time since 2011, including against the background of a significant increase in the production of computers, electronic and optical products for the needs of Defense Industry Complex);

agricultural production – by 6.1 percent (in particular, owing to the largest grain, sunflower and soya crop in the entire history of observations);

construction – by 13.1 percent (against the background of the launch of large-scale processes on housing construction and upgrade of production facilities and infrastructure);

retail trade turnover – by 4 percent (under conditions of expansion of the households' financial capacity);

cargo turnover –  by 2.4 percent, passenger turnover – by 5.4 percent (against the background of the restoration of passenger air transport development).

 

Change in the volumes of industrial, construction and agricultural products, % compared to the corresponding period of the previous year

 

Under such circumstances, and under the influence of changes introduced to tax legislation, which are aimed at improving the administration of payments, the creation of equal and fair taxation conditions, as well as increase in filling of budget the revenues of the state budget have increased in 2016 by 15.3 percent up to UAH 616.3 billion compared to 2015. The annual distribution of state budget revenues as amended was overfulfilled by 1.4 percent or by UAH 8.3 billion. Over 2016, VAT was refunded in cash to the amount of UAH 94.4 billion, which is by UAH 26.0 billion or 38 percent more than in 2015.

At the same time, as a result of production growth, slowdown in inflation wave, raise in minimum wage (by 13.1 percent in 2016 in weighted average calculation), as well as reduction of single social contribution rate and accordingly the load on the payroll, from May 2016 the growth in real wages is observed for the first time over the past two years compared to the corresponding period in the previous year, which at the end of 2016 was 9 percent. Moreover, the average monthly salary of full-time employees in 2016 has increased by 23.5 percent up to UAH 5,183. In 2016, the wages in socially important areas of activities were increasing at a fast pace – in education by 20.3 percent (nominally before 2015) up to UAH 3,769, in health care by 20.2 percent up to UAH 3,400.

 

Change in real wages, % compared to the corresponding period of the previous year

In turn, against the background of raise in wages and decrease in the amount of wage arrears a labor productivity growth takes place, which in the future will to a great extent contribute to improvement of competitiveness in the current economic conditions. Labor productivity growth for 9 months of 2016 amounted to 2.4 percent in calculation to the corresponding period in 2015 compared to a drop by 2.9 percent for 9 months of 2015. The amount of wage arrears as of 1 January 2017 has decreased by 4.8 percent compared to the corresponding period of 2016.

Thus, the overall situation prevailing in the economy at the end of 2016, despite the presence of significant problems and risks, makes it possible to ascertain the beginning of the gradual laying of foundation for further sustainable development in the new economic realities.

In general, according to Priority Action Plan of the Government for 2016 the work of the Cabinet of Ministers was focused on 74 priority areas, for each of which a goal and targets expected to be achieved in 2016 were set, as well as specific steps planned to be done before the end of the year (more than 360 in total).

In order to ensure effective implementation of the Action Plan an electronic system for monitoring its implementation by the ministries and other central executive bodies with the involvement of external experts was introduced. The monitoring was conducted both for the observance of deadlines for completion of the relevant tasks and for the achievement of the defined indicators of reform implementation in a given area, which allowed the prompt settlement of problematic issues.

 

 

Results of Cabinet of Ministers activity in 2016

The results of Government performance in 2016 show gradual progress in achieving strategic priorities.

Macroeconomic stabilization is one of the Government's key priorities in 2016, the successful implementation of which is evidenced by a recovery of GDP growth, significant decline in inflation, stability of the national currency exchange rate throughout the year.

State budget deficit was retained within target indicators. The Law of Ukraine "On the State Budget of Ukraine for 2016" (as amended) set the ceiling volume of the state budget deficit in the amount of UAH 83.7 billion or 3.7 percent of Gross Domestic Product (calculations included the projected Nominal Gross Domestic Product of UAH 2.2628 billion according to SNA 2008 methodology), which meets the agreements and is agreed upon with the IMF. At year-end 2006, the actual state budget deficit made up UAH 70.1 billion corresponding to 80.4 percent of the annual target with amendments, or 3.1 percent of the projected Nominal Gross Domestic Product.

The Government has taken important steps to eliminate imbalances and solve problems that have accumulated in the economy over the past years and posed a threat to macroeconomic stability.

Thanks to the measures taken by the Government, the National Joint Stock Company "Naftogaz of Ukraine" for the first time over the past six years did not receive budget funding, and according to preliminary data for the first time over the past five years received net profit in the amount of more than UAH 21 billion, from which among other things, the company will pay dividends to the state budget.

In addition, in order to facilitate the increase in volumes of domestic production of natural gas, attract investments in the energy sector and ensure energy independence of the state, efficient use of energy resources and management of the sector with due regard for the principles of rule of law, non-discriminatory participation of all stakeholders, transparency, and ensure social standards, further improvement of policy in oil and gas sector the Government approved the Concept for Development of Ukraine's Gas Production Industry.

The implementation of the Concept will enable public and private enterprises to increase natural gas production up to 27.6 BCM in 2020.

In order to ensure further sustainable functioning of coal industry companies, the funds amounting to UAH 2,156.3 million were provided for in the State Budget for 2017 as an additional state support for such companies, including for the implementation of measures to restructure the coal- and peat-mining industry in the amount of UAH 846.3 million, state support to coal mining companies for partial covering of the cost of finished commercial coal products (payment of wages to miners) in the amount of UAH 870 million.

A reform of public finance management system was launched for the purpose of further recovery of public finances that will make it possible to prevent the reproduction of fiscal crisis in the future. A comprehensive strategy to reform public finance management system was developed in cooperation with donors, which implies a range of measures aimed at mitigating fiscal risks, increasing the efficiency of public expenditure, improving tax administration and the level of compliance with tax legislation, improving control over the use of public funds, etc.

Work is ongoing on verification of social payments, in particular, a software product is being created for the automation of information exchange with budget funds spending units for carrying out electronic verification and a draft law of Ukraine "On Verification" and draft Strategy for Creation of Analytical and Information Platform "Payment Verification" are being developed.

So, for example, over March-December 2016, budget funds spending units were given 1,577,984 recommendations for termination of payments and verification of data provided by recipients of social payments.

Creating favorable conditions for doing business.

Economic growth in Ukraine is restored and revives gradually. Today, the task is to accelerate the pace of growth for steady and sustainable development.

In the course of 2016, the Government paid special attention to measures aimed at ensuring economic growth, in particular, the development of business and investment climate, as well as development of infrastructure, primarily road network.

At the end of the year, the Parliament adopted legislative changes to tax administration reform – the outcome of joint work of the Government, People's Deputies of Ukraine, expert community and business representatives. This reform has solved a number of important problems in tax administration. Changes that have the greatest effect include, among others, the following:

introduction of a single public register for value added tax refund;

legislative support for the taxpayer's electronic cabinet;

transfer of control functions to the Oblast level, while only service functions are left at the Raion level;

tax reform.

To enhance the Government's capacity for work with business climate, a number of auxiliary institutions was created, such as Investment Support Office, Export Promotion Office and High-tech Office, National Committee for Industrial Development and Expert Board of the Committee. These institutions are focused on work with the key areas for further economic development of the country, that is attracting investment, increasing exports and developing high-tech industries.

Customs reform is implemented to improve the efficiency and ease of cross-border trade. In particular, positive results are shown by "single window" system during customs clearance of goods and vehicles, which makes it possible to simplify and accelerate the process of interaction between enterprises and public authorities exercising customs, sanitary and epidemiological, veterinary and sanitary, phytosanitary, environmental, radiological and other types of control.

At the request of the Government a Group of Experts of the United States Customs and Border Protection conducted a diagnostic mission, following the results of which the Government of Ukraine was provided with a report on the results of analysis of policies, procedures and laws, as well recommendations on reforms and removal of shortcomings to create modern, efficient customs authorities.

Currently, a working group chaired by the Prime Minister of Ukraine is preparing an action plan for reform of Ukrainian customs, taking into account, in particular, Ukraine's commitments under the WTO, EU-Ukraine Association Agreement and the conclusions and recommendations of the United States Customs and Border Protection.

The mandatory introduction of electronic procurement via ProZorro system for all government agencies, local authorities and state enterprises has opened a huge market for public procurement for the business. Equal access to public procurement for all market players will make it possible (in particular, by reducing the information asymmetry) to significantly strengthen the market positions of a high-quality conscientious business in the economy. Since the introduction of electronic procurement system and as of 1 January 2017, the budget savings amounted to about UAH 8.3 billion or 10.2 percent of the total amount of procurement.

In order to improve regulation the Government conducted work on comprehensive review of regulatory acts. Today, the following key areas are covered: agriculture and food safety, construction, energy industry, transport and infrastructure, information technology and telecommunications.

Simplification of conditions for doing business is ensured by means of technical regulation, in particular, over 76 subordinate regulatory acts were adopted to implement the Laws of Ukraine "On Standardization", "On Metrology and Metrological Activity" and "On Technical Regulations and Conformity Assessment".

In 2016:

1466 national standards were adopted, 1320 of which are identical to international and European standards (in total, over 2014-2016, 6749 standards were adopted, 6388 of which are identical to international and European standards);

49 technical regulations were adopted (46 regulations were developed based on European directives), 48 of which are implemented;

a transition is made from compulsory product certification in the state certification system to assessment of conformity with technical regulations;

the list of products subject to mandatory certification in Ukraine was reduced by 87.6 percent;

state tests of measuring instruments were abolished and replaced with assessment of measuring equipment conformity with technical regulations;

the list of categories of legally regulated measuring instruments was reduced by half.

The Government expanded the Committee on the appointment of heads of enterprises particularly important for the economy. The number of independent non-governmental members of the above Committee was increased from 5 to 8 and the number of members of the Government was increased accordingly to 8.

The heads of PJSC "Ukrzaliznytsia", PJSC "Ukrposhta" were appointed on a competitive basis.

The State Budget for 2017 for the first time envisages expenditure in support of agricultural enterprises development in the amount equivalent to 1 percent of the value of gross output produced by them in the past year (UAH 5.5billion). In particular, changes introduced to the Tax Code allowed the allocation of UAH 4 billion of budget funds for financial support to producers of agricultural products consumed in domestic market (livestock, plant, gardening, berry-growing products).

In addition, the budget provides for allocation of UAH 550 million for partial compensation to agricultural producers of the value of agricultural machinery and equipment purchased by them, and this will also give impetus to the agricultural machine building enterprises and their subcontractors.

As regards the rule of law and combating corruption the Government implemented measures to ensure the fully-fledged functioning of the newly established agencies for prevention of and combating corruption.

The most important anti-corruption measure in 2016 was undoubtedly a large-scale electronic declaration conducted successfully in September-October.

The Cabinet of Ministers of Ukraine approved specific measures to prevent corruption in the ministries and other central executive bodies, which have been developed under government-public initiative "Together against Corruption". In December 2016, the Government and the public summed up the first results of this work. Such interaction of the Government and the public in the fight against corruption will continue in 2017.

From 1 September 2016, throughout the entire territory of Ukraine, except temporarily occupied territory and anti-terrorist operation area, 427 legal aid offices started their activities and provide services for primary legal aid, access to free secondary legal aid and electronic services of the Ministry of Justice, carry out activities on raising legal awareness and strengthening legal capacity of territorial communities.

As regards improvement of public administration and public services quality the Government adopted the Public Administration Reform Strategy developed in close cooperation with the experts of SIGMA Programme (Support for Improvement in Governance and Management), the European Commission and civil society, and approved an action plan for its implementation. A Coordination Council for Public Administration Reform was established for coordination of the Strategy implementation, within which a common approach to such coordination was defined and the composition of the respective working groups was approved. To support the implementation of the Strategy and to improve the capacity of government institutions in the field of public finance management an Agreement with the European Commission on financing of the Programme "Support for Comprehensive Public Administration Reform in Ukraine" was signed.

In order to create the institutional framework of public administration reform a Department for Public Administration and Department for Strategic Planning and Coordination of Public Policy were established within the Secretariat of the Cabinet of Ministers of Ukraine.

A Reform Staff Positions Concept was introduced, which is aimed at ensuring the renewal and strengthening of human resource capacity of public authorities and improving their performance in preparation and implementation of key national reforms aimed at improving the living standards of the citizens of Ukraine and strengthening the positions of our country in the world rankings of competitiveness.

Within the civil service reform the Government focused on implementing the Law of Ukraine "On Civil Service". In the course of 2016, for the purpose of implementing the aforementioned Law, four draft laws were approved, 21 regulations and 13 ordinances of the Cabinet of Ministers of Ukraine were adopted, 14 orders of the National Agency of Ukraine on Civil Service and of the Ministry of Social Policy were issued, by which, in particular:

a Commission on Senior Civil Service was established;

the procedure for competitive selection for civil service positions was regulated and the requirements for persons applying for such positions were defined;

the matter of state agencies staff management, salaries and wages, etc. was settled.

As of 8 February 2017, a competition for 115 category "A" civil service positions was announced and for 110 positions the competition was held, following the results of which the President of Ukraine appointed 18 heads of raion state administrations and five oblast state administrations; the Cabinet of Ministers of Ukraine appointed 14 heads and deputy heads of central executive bodies; 13 state secretaries of ministries, State Secretary of the Cabinet of Ministers of Ukraine; three Deputy State Secretaries of the Cabinet of Ministers of Ukraine.

To improve the procedure for preparation and making of the Government's decisions a number of amendments was introduced to the Regulations of the Cabinet of Ministers of Ukraine, which introduced a quarterly planning of consideration of the issues at the meetings of the Government, limited the ability to submit draft acts without complying with regulatory requirements, improved the procedure for organization of the government committees work and shortened the term for approval of certain documents. A working group established at the Secretariat of the Cabinet of Ministers Ukraine has drafted new Regulations and a completely new document – Guidelines for Drafting Regulatory Legal Documents and State Policy Documents. Work has begun on the introduction of qualitatively new procedures: analysis of problems addressed by the policy, consultation with stakeholders, forecasting impacts at the stage of elaborating the decisions, evaluation of policy implementation and its revision.

From 15 August 2016, the exchange of documents between the Secretariat of the Cabinet of Ministers, central executive bodies, oblast state administrations solely in electronic form via system of electronic interaction between executive bodies was introduced.

As part of the decentralization process, in 2016 the process of voluntary amalgamation of territorial communities continued. During 2016, 207 amalgamated territorial communities were established, in which the first local elections have been held. The above territorial communities included 946 local councils, representing more than 9 percent of the total number of basic-level local councils. Thus, since the adoption of the Law of Ukraine "On Voluntary Amalgamation of Territorial Communities", 366 amalgamated territorial communities have been established in Ukraine throughout 2015-2016, which included 1,740 village, town and city councils, representing 17 of the total number of basic-level local councils.

Fiscal decentralization is continuing successfully. In 2016, own revenues of local budgets have increased by 41.6 percent compared to 2015, and their share in total revenues of consolidated budget has increased from 18.5 to 21.8 percent. In 2016, 159 amalgamated communities had direct budget payments to/from the state budget, receiving from it educational and medical subventions, as well as funds to build their own infrastructure.

Work is under way to create and expand a network of administrative services centers (currently, 682 administrative services centers are operating in Ukraine, through which nearly 8,700 thousand services were provided in 2016). In parallel, a decentralization of administrative services is under way – the powers for registration of rights to immovable property, registration of business, place of residence of individuals and issuance of passports were transferred to local authorities.

As regards restoration of security of the state and the citizens, Government's efforts are aimed both at countering external aggression and at ensuring the safety of citizens inside the country.

The Government ensured a clear and uninterrupted financing of military expenditures, which enabled at the appropriate level to perform the tasks of protecting the territorial integrity and inviolability of the state. This also made it possible to ensure a stable trend towards increase in the number of military personnel serving under contract and not to call up the citizens for military service within mobilization. At the same time, a call-up for compulsory military service was retained as one of the source of accumulation of trained human resources. It should be noted that military conscripts are not involved in the anti-terrorist operation tasks.

In 2016, basic documents on defense reform, in particular, the Strategic Defense Bulletin, were adopted, and the State Program on Armed Forces Development until 2020 was developed. Those documents initiate the transformation of the Armed Forces into a more modern and efficient army that will function according to NATO standards. General Staff of the Armed Forces reform is under way.

According to strategic defense documents the State Budget of Ukraine for 2017 provides for financing of the security and defense needs at the level of 5.2 percent of Gross Domestic Product.

The process of patrol police units establishment is under way. Currently, patrol police is operating in 32 cities of Ukraine with a total headcount of over 12 thousand officers.

In general, 34 mobile patrols of patrol police are involved in ensuring road safety on the automobile roads with a total length of over 1.5 thousand kilometers in Kyiv, Odesa, Lviv, Mykolaiv, Kherson, Volyn, Rivne, Zakarpattia and Zhytomyr Oblasts.

With a view to informational reintegration of the occupied territories the Government has restored and created new facilities of telecommunications infrastructure in the area of anti-terrorist operation. The broadcasting of "Holos Donbasu" (Voice of Donbas) radio focused on eastern areas was launched.

The main goal, at which ultimately all the efforts of the Government are aimed, is improving the welfare of citizens.

The amendments to the State Budget of Ukraine for 2016 have increased the living wage from December 2016. Thus, the increase in living wage in 2016 amounted to 116.1% vs. 112.5% of approved one.

The Government passed a decision to increase from 1 January 2017 the minimum wage by half to UAH 3,200 (which is twice the living wage for able-bodied persons). Such an increase will help improve the purchasing power of the people and reduce poverty level among people in work; legalize salaries; increase revenues to the state budget and social security funds, including pension fund. In the future, this will make it possible to raise the pension.

To prevent the "leveling" of wages of unskilled and skilled workers the heads of institutions, establishments and organizations of certain branches in the public sector were entrusted with ensuring a differentiation of wages within the payroll by establishing bonuses, allowances, incentive payments given the complexity, responsibility and conditions of work performed, employee's skills, results of his work.

In order to implement the above initiatives, in 2017 state budget expenditures for salaries of public sector employees have increased by almost UAH 40 billion compared to expenditures in 2016.

According to monitoring of the Ministry of Social Policy average salary as of 1 January 2017 was as follows:

education workers – UAH 5,126 (an increase by 56.8 percent or UAH 1,857 compared to 1 January 2016);

health workers – UAH 4,479 (an increase by 56.9 percent or UAH 1,626 compared to 1 January 2016).

To ensure adequate social protection of every citizen of Ukraine a gradual increase in the growth of living wage over 2017 by 10.1 percent is envisaged, according to which pensions and state aid will rise.

In 2016, the Government has increased almost by half (up to UAH 2 thousand) the cost of solid fuel, for which privileges are granted and subsidies are calculated. For 2017, the volume of subventions from the state budget to local budgets for granting of privileges and subsidies for the purchase of solid fuel and liquefied gas has been approved in the amount of UAH 2.5 billion.

A targeted social support of the population was ensured, in particular, 6.7 million families receive subsidies for compensation for housing and utility services costs. In addition, a fair approach to determining the income of citizens, which is taken into account when assigning subsidies in total income, has been introduced in order to strengthen social protection of certain categories of persons.

Government's efforts are aimed at improving the quality of services provided to people. So, for example, the Government made decisive steps towards health care reform. In addition, health care expenditures in the consolidated budget for 2017 are envisaged in the amount of UAH 88.9 billion (an increase by UAH 18.4 billion or 26.1 percent compared to 2016).

In order to provide patients with a sufficient quantity of expensive medicines to treat HIV/AIDS, tuberculosis, cancer, cardiovascular diseases, rare orphan diseases, ensure immunoprophylaxis activities for the population, etc., UAH 5.9 billion is envisaged for 2017 (UAH 2 billion additionally to the volume of expenditures in 2016).

In order to support the first steps of health care reform implementation, in particular, for the introduction of medicines reimbursement system, in 2017 it is expected to grant a subvention from the state budget to local budgets for the reimbursement of the medicines for treatment of certain diseases (cardiovascular diseases, asthma and type II diabetes) in the amount of UAH 500 million.

In 2017, it is also expected to provide each oblast with angiographic equipment by granting subventions from the state budget for the purchase of such equipment under co-financing conditions in the amount of UAH 150 mln.

In order to ensure financial support for holding Eurovision Song Contest in 2017 in Ukraine, the following steps have been made:

The Government has allocated EUR 15 million (UAH 430 million) as a financial guarantee for ensuring the performance of agreement between the National Television Company and the European Broadcasting Union.

Kyiv City State Administration has allocated UAH 34.3 million to ensure the financing of the preparatory work for holding Eurovision Contest in 2017. In the current year, another UAH 165.7 million are envisaged in the Kyiv city budget. Moreover, the city will allocate about UAH 800 million for costs associated with the assumed obligations as a host city.

State Budget of Ukraine for 2017 includes targeted expenditures in the amount of UAH 455.7 million for State Committee for Television and Radio-Broadcasting of Ukraine under budget programme "Ensuring the Preparation and Holding of 2017 Eurovision Song Contest".

In 2016, Articles of Association of the National Public Broadcasting Company of Ukraine Public Joint Stock Company have been approved by Regulation of the Cabinet of Ministers of Ukraine. In 2017, the expenditure amounting to UAH 970.8 million are envisaged for its financial support.

The EU-Ukraine Association Agreement remains a reference for political and economic reforms. In 2016, the implementation of provisions of this Agreement has become a priority, primarily those aimed at creating an in-depth and comprehensive free trade area between Ukraine and the EU, temporary application of which has begun from 1 January 2016.

Thanks to cooperation between the Government and Parliament over 30 Laws of Ukraine have been adopted in 2016, which were aimed at fulfillment of obligations under the Association Agreement, Action Plan on Visa Liberalisation for Ukraine, associated with Ukraine's membership in the Energy Community. More than 70 draft laws associated with the implementation of European integration policy are under consideration in the Verkhovna Rada.

In 2016, to support the reforms and implementation of the Association Agreement an aid was attracted from the EU in the amount of EUR 643.015 million. In particular, a number of agreements was signed with the EU Party, including relating to the implementation of a comprehensive Public Administration Reform Strategy for 2016-2020, and implementation of projects under four cross-border cooperation programmes.

Ukraine has met all the requirements necessary for granting a visa-free regime for travel of Ukraine citizens to Schengen area countries. This is about accomplishment of more than 140 tasks, in particular, as regards adoption of the necessary laws and ensuring its proper implementation in such areas as border management, migration, document security, non-discrimination and protection of human rights, combating human trafficking, money laundering, fight against corruption. Ukraine's legislation and practices in all those areas meet the EU standards and this means that there are no obstacles to the functioning of the visa-free regime between the Parties. Currently, the matter of actual introduction of such travel regime for citizens is centered solely around the political decision of the EU.

A cooperation with the International Monetary Fund has been ensured. According to the results of the second review of a joint program with the IMF under the Extended Fund Facility (EFF), on 16 September 2016 Ukraine has received the third tranche in the amount of
USD 1 billion (SDR 716,1 million), the funds of which were allocated to replenishing the reserves of the National Bank of Ukraine.

From 3 to 16 November 2016, a mission of the IMF's European Department stayed in Ukraine to initiate the third review of the joint program. The mission noted recent positive changes taking place in Ukraine, especially concerning decrease in the inflation level, increase in international reserves, clean-up of the banking system and gradual economic recovery.

Cooperation with international financial institutions (IFIs) is under way. As of 1 January 2017, the portfolio of IFI projects consists of 34 projects totaling about USD 3.122 billion and EUR 4.841 billion (8 IBRD projects amounting to USD 2.702 billion, 9 EBRD projects amounting to EUR 1.577 billion and USD 420 million, 12 EIB projects amounting to EUR 2.747 billion, 1 Euratom project amounting to EUR 300 million and 4 KfW projects amounting to EUR 217.5 million). The projects are aimed at the development of automobile roads of Ukraine, energy sector, municipal and railway infrastructure, support for small- and medium-sized businesses, including in the agricultural sector, at restoring the infrastructure of Donbas.

The Government responded quickly and decisively to the challenges that required urgent solutions.

To stabilize banking system Public Joint-Stock Company Commercial Bank "PrivatBank" was nationalized. This is the largest bank in the country, the financial situation of which required immediate capital increase.

In connection with the situation that emerged in the city of Avdiivka in Donetsk Oblast as a result of fighting, prompt measures were taken to restore the life support systems of the city, in particular, heating, water and power supply systems. The city population is provided with food and essentials, the work on restoring houses is performed.

In general, over the period of activities the Government as of 10 February 2017 has submitted to the Verkhovna Rada of Ukraine 240 draft laws, 40 of which were adopt as a whole, 13 in the first reading, 156 are prepared for consideration in the first reading. In addition, the Cabinet of Ministers has issued 834 Resolutions and 886 Ordinances, including concerning the approval of four strategies (Public Administration Reform Strategy of Ukraine for 2016-2020, Strategy for Modernization and Development of the Pension Fund of Ukraine until 2020, Strategy for Reforming the State Emergency Service of Ukraine, Strategy for Reporting the Reporting System in the Field of Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction) and 10 Concepts of Public Policy.

The speed of reforms was influenced by a number of factors both of external and internal nature, the aggression of the Russian Federation (from temporary occupation of certain territories of Ukraine to information and trade war), the drop in world prices in key commodity markets for domestic exports against the background of fierce global competition and quite slow economic development of major trading partners, the imbalances in the economy accumulated over prior periods, delays in implementation of reforms by the previous Governments, the institutional weakness of public administration system.

Given the above constraints, the Government, although has managed to reach considerable progress in achieving strategic goals, but in 2016 not all the objectives provided for in the Priority Action Plan of the Government for 2016 were achieved.

As a follow-up to the work started and in order to accelerate the reforms, ensure the transformation process, and based on the immutability of strategic goal to ensure sustainable economic growth as a prerequisite for raising the level and quality of life of the citizens, in late December the Government presented a draft Medium-Term Plan of Priority Actions for the Government until 2020, which is aimed at synchronizing the efforts of all the stakeholders, including international organizations and donor community, and combination of the state policy of the country in the same strategic vision, in order to improve the welfare of citizens.

The drafting of this document was provided for by the Action Program of the Cabinet of Ministers of Ukraine, which has been approved by the Verkhovna Rada of Ukraine and its content complies with the provisions of that Program. In the course of its drafting the experience of the first months of the Government work was also taken into account and therefore the Plan must ensure the continuation and building-up of efforts that have been made by the Government in 2016.

At the same time, the draft Plan provides for the transition from anti-crisis planning to medium-term planning and has to become a benchmark for sustainable development of Ukraine. 

This draft contains five clearly defined strategic priorities covering different areas of the country's life and are fundamental elements of its transformation:

economic growth – increase in exports and investment, tax and customs reform, deregulation, land reform, privatization, energy sector reform and maintaining macroeconomic stability by continuing fiscal consolidation;

good governance – public administration reform, decentralization and public finances reform;

human capital development – education reform, health care reform, improvement of providing state social support, development of culture and sports;

rule of law and combating corruption – support to effective functioning of anti-corruption institutions and cooperation, ensuring equal access to justice and ensuring effective protection of property rights;

security and defense – taking actions to protect the sovereignty and territorial integrity of the state, as well as most important aspects of security of citizens.

For each of the priorities the targets are identified, key steps for achieving them and the priority areas of the policy that will set the general frame of work for the entire executive branch.

In January, a broad discussion of the Medium-Term Plan was started with expert community, the public, representatives of international organizations. Following the results of the proposals received the Plan is currently being finalized and will soon be approved by the Government.

Based on the Medium-Term Plan, with a view to accelerate the implementation of key aspects of the reformist transformation, the Government will form a package on key legislative changes. This package will be presented for a thorough discussion by society and based on the results it will be submitted to the Verkhovna Rada of Ukraine.

The Government has fulfilled its main task in 2016, namely the foundation for overcoming the crisis and stable development of Ukraine in the coming years has been laid. Thanks to the joint work of the Government and the Verkhovna Rada of Ukraine the country has entered 2017 with a timely adopted State Budget that defines clear priorities for the current year.

The consolidation of results achieved in 2016, the implementation of plans for 2017, defining clear medium-term priorities and their unconditional observance is the path that will ensure sustainable success to our state and a new quality of life and restoration of social justice to its citizens.  

We expect that already in 2017 the first signs of economic recovery that are achieved, will become tangible for Ukrainian citizens in the form of higher wages, more equitable social benefits and services of higher quality.

Ukraine has all the prerequisites to become a successful European country, and the Government, being aware of its responsibility to the Ukrainian people, particularly to all those who laid down their lives and health for the Ukraine's right to freely choose its own future and today protects this right on the eastern borders of the country, will make every effort to implement these prerequisites and ensure sustainable development of the county.