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By Lakdasa Wijetilleke

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When tariffs on utilities are raised, vested interests run up arrears. The Ukrainian economy will move forward again only when powerful interests develop an interest in reform. This can best be accomplished by engaging these groups in the dialogueand by strict enforcement of hard budget constraints and anti-corruption measures. Institutional Constraints The policy reform debates in the parliaments of Europe demonstrate how slow, painful, and demanding the change process can be, even with top professional staff who can focus on a relatively limited range of issues.

World Bank and other experts who assisted and complemented the work of the Ukrainian teams included: Foreign Trade and Commercial Policies: Michael Michaely with Veronika Movchan; Intergovernmental Fiscal Relations: Deborah Wetzel, Thomas Cochran, Mark Davis, Sean O'Connel, Leonid Polishchuk and Lucan Way; Public Expenditures on Education and Health: Frederick Golladay, Galina Sotirova, Kate Schecter and Ghanaraj Chellaraj: Legal Threats to Fiscal Sustainability: Joachim Lippott (Legal Advisor, TACIS/UEPLAC); Agriculture: Csaba Csaki, Mark Lundell and Ian Shuker; Banking Reform: Angela Prigozhina and Alan Roe; Coal Sector Policy: Heinz Hendriks: Shadow Economy: Maxim Ljubinsky; District Heating Policy: Carolyn Gochenour: Electricity Market Reform: Laszlo Lovei, Istvan Dobozi and Sergey Milenky, Environment: Alexi Slenzak; Education Finance: Katerina Petrina; Fiscal Reform: Mark Davis; Gas Sector Policy: Laszlo Lovei and Konstantin Skorik; Housing and Water Sectors: Ihor Korablev; International Trade: Veronica Movchan; Labor Market: Arvo Kuddo; Pension Reform: Larisa Leshchenko and Katerina Petrina; Private Sector Development: Gregory Jedrzejczak and Vladimir Kreacic; Prospects For Economic Reform and Debt Sustainability: Andriy Storozhuk; Social Assistance: Galina Sotirova; and Transport Sector: Pedro Taborga.

This, together with the monetary overhang from the Soviet era, lead to hyperinflation. Between the end of 1992 and the end of 1994, prices increased by almost 500 times. The public lost confidence in the domestic currency, producing sharp declines in real money balances. Today Ukraine has one of the smallest banking and monetary systems in the world relative to GDP, and much of the available credit has been absorbed by the government, crowding out the enterprises and making it hard for them to borrow the money they need for payments, investments, and growth (figure 2).

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