War & Corruption 'Ukraine Is Not Bankrupt'

Natalia Jaresko, a Ukrainian-U.S. national and Ukraine's new finance minister, said her country faces existential challenges from its war with Russia and government corruption. But reforms are being put in place, she said, and the nation will rise again.
Ukraine's new finance minister, the Ukrainian-American Natalia Jaresko, said her country is making the necessary reforms to avert bankruptcy and rebuild its economy.

Natalia Jaresko has lived for the last 23 years in Ukraine, three of those as an employee of the U.S. Embassy in Kiev, and 20 years as a manager for American investment funds. Ms. Jaresko, who became Ukraine’s finance minister in December, was born in 1965 in Illinois to Ukrainian immigrants. On the day before she became Ukraine’s finance minister, Ms. Jaresko received her first Ukrainian passport. On Thursday, she met with her German counterpart, Wolfgang Schäuble, during a visit to Berlin. On the side of the meeting, she gave an interview to Handelsblatt’s chief foreign correspondent, Mathias Brüggmann.


Ms. Finance Minister, according to press reports, your country is on the brink of bankruptcy. Is that true?

No, bankruptcy is not in the cards. Our country is very rich and has great potential. Unfortunately, it has had corrupt leadership for many years and is now in a war. And because of that, we are in a severe financial crisis in very difficult times. But we are not a bankrupt country.

But experts say Ukraine will declare bankruptcy this year if the international community doesn’t come up with an aid package of $15 billion.

When the Prime Minister, Arseni Jazenjuk, took over, the government coffers had been plundered and were empty. We received about $9 billion from our partners – the International Monetary Fund, the European Union, the United States and others. Last year, we were able to service $14 billion in old debt with this help. Of that, almost $4 billion went to pay Gazprom for natural gas. The $15 billion figure you cite now is an estimate from the IMF.

No, bankruptcy is not in the cards. Our country is very rich and has great potential. Unfortunately, it has had corrupt leadership for many years and is now in a war. Natalia Jaresko, Ukraine Finance Minister

So does Ukraine actually need $15 billion in new loans this year?

We definitely need new aid from our partners, but in the form of loans, not gifts. And we are discussing the details of such a package right now with the IMF. The new IMF mission arrived in Kiev on Thursday.

Are you discussing $15 billion in new aid?

That is an estimate. We are very confident that with help from our partners we will be able to manage the extreme financial crisis we are going through, which has only been exacerbated by the war. And in exchange, we will put in place a very ambitious economic reform program.

What has happened since the new government came into power in December, and what is planned?

We have ensured that business tycoons are now paying taxes and are unable to limit their liabilities through off-shore tax schemes. We are also renegotiating our bilateral tax agreement with Cyprus, with an eye to closing a loophole that had enabled some to pay a very low tax rate. We have increased fees for the development of oil, natural gas and coal reserves. For high wage earners, we have increased the income tax to 20 percent from 15 percent and have introduced a tax on jewelry and luxury cars.



Those apply to private individuals. What about companies? Are they paying taxes?

We are trying as much as we can to combat the underground economy and legitimize all forms of economic activity. We have reduced the social insurance and other mandatory charges excluding income tax that are paid by employers to 16.5 percent of wages for companies willing to play by the new rules. We are not only closing tax loopholes in this way but, in effect, we are actively fighting widespread corruption.

In addition to your official government budget problems, Ukraine is losing enormous amounts of money on state-owned firms. What are you doing to change that?

We will soon set in motion a wave of deregulation that will give companies more freedom and fight bureaucracy and corruption. And we will radically reform state-owned enterprises to make sure they pay dividends instead of generating losses, or that they are privatized. In focus is the state-owned natural gas company Naftogaz, which received more than €5 billion in 2014 in subsidies from the government because natural gas prices in the Ukraine were too low.

What will you do with Naftogaz?

This year, market prices for natural gas will be applied in the Ukraine and consumption of natural gas will be reduced through efficiency measures. Naftogaz’s business will finally become transparent. And we want to conform to European Union law and split Naftogaz into two firms: One that produces and supplies natural gas and another that distributes and stores gas. Such a restructuring could enable us to attract international investors.

You spoke of the war in Ukraine. How badly is this hurting your economy?

The war has been incredibly expensive. Twenty percent of our country is occupied by the Russians. About 850,000 Ukrainians have fled and have to be cared for. Each day, the direct costs of the war approach €5 million. The war has been very painful. But Ukrainians are ready to pay this price to live under European law as a legitimate part of Europe. We are ready to invest in Europe’s security and peace. Because the conflict with Russia is not just with Ukraine but all Europe.

I was always a Ukrainian, and was raised in a Ukrainian family in the United States. Now I’m a Ukrainian with a Ukrainian passport. Natalia Jaresko, Ukraine Finance Minister, a dual Ukrainian-American national

You speak of “we.’’ But you only became a Ukrainian citizen a day before taking office.

I was always a Ukrainian, and was raised in a Ukrainian family in the United States. Now I’m a Ukrainian with a Ukrainian passport. I have been living for 23 years in Kiev, and only during the first three was I an employee of the U.S. Embassy in Kiev. My children have grown up here. Ukraine is my home.

But why did you – a dollar millionaire and successful fund manager – go into politics?

My county is in great crisis. Some people are volunteering for the front lines, and I am helping do what I can do best. I believe in this country, which has effectively been plundered but still has great potential, especially if companies are given the freedom they need. But I am not a politician and am not a member of any political party.

Then how do you see yourself?

I see myself as a technocrat who wants to help rebuild her nation and brings with her relevant experience to the job. And I am not the only one in this new government. In a few years, some of us want to return to the private sector. Maybe I will too.


Mathias Brüggmann is Handelsblatt’s chief of international correspondents and has worked for the newspaper in Moscow, Brussels and Warsaw. His focus is on Russia, eastern Europe, Iran and the Middle East. To reach him: [email protected]