Ukraine - Country partnership strategy progress report for the period FY08-FY11

This Ukraine Country Partnership Strategy Progress Report (CPS PR) assesses implementation of the Bank's 2008-2011 CPS at mid-term. Going forward, the CPS PR outlines a program that refocuses activities around the core elements of the two revised pillars. The first pillar is restoring economic growth and improving competitiveness. The second pillar is public finance and public sector reform and improved service delivery. Development policy lending will be gradually scaled back but will remain around half of total commitments until the end of the CPS. The financial sector will become a core area for both International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC), with significant financial and advisory support. IBRD and IFC investments will be concentrated in support of the first pillar, with the aim of supporting private sector led economic recovery. Activities under the second pillar will focus on the challenge of fiscal reforms, improving the efficiency of public spending, and strengthening governance and accountability of public sector institutions. The original CPS design provided room for Analytic and Advisory Activities (AAA) in areas with limited government ownership through advocacy as well as in areas where the Bank needed to invest in its own capacity. The needs of the crisis response will require a reduction in these activities. The downside risks to the economy remain considerable, in particular on the fiscal side and in the banking sector. The World Bank Group (WBG) will aim to partly mitigate these risks by supporting the government in managing fiscal and financial sector challenges. Governance risks to the reform agenda are high and the CPS PR assumes that reforms will continue to be modest and uneven. Moreover, there are a number of areas in the implementation of the present program that are prone to governance risks, including lack of government commitment, weak capacity of implementing agencies, and poor government coordination and decision-making mechanisms. The CPSPR will address these risks by shifting the focus to the core of the program. Risks to program delivery will be mitigated by greater focus on resolving obstacles to portfolio implementation on the Bank side, improved assessments of implementation capacity for investment loans, measures to operationalize governance and close partnership with development partners to maximize policy leverage.