Ukraine, with its limited resources, must steer clear of ineffective public investments, often referred to as "white elephants," particularly by enhancing the capabilities of its institutions, noted the International Monetary Fund (IMF) Resident Representative in Ukraine, Priscilla Tofano, during a discussion initiated by the RRR4U consortium in Kyiv on Thursday.
"We use the term 'white elephant' to describe any investment that is costly and does not yield proportional or any benefits at all. There are many examples of 'white elephants' around the world, and I am confident that Ukraine is no exception," she said, explaining, among other things, the need for improved public investment management in the cooperation program between the Fund and Ukraine.
In discussing 'white elephants,' Tofano emphasized that this is not just about wasting public funds but also about fostering corruption.
According to her, the reform of public investment management has emerged at a pivotal moment for Ukraine, when the government's need for investments for recovery and reconstruction is very significant, yet the fiscal space for this is limited.
"When reconstruction truly begins, which I hope will be soon, the scope for inefficient management and financial abuses will only increase. The task of preventing these abuses and violations is challenging. We believe that strengthening institutions is priority number one," said the Fund representative.
"In this regard, we would like to support the Government's determination to strengthen institutions. One example of such determination is the amendments to the Budget Code. We know how much political capital this has cost and the attempts by stakeholders to delay it, so we would like to congratulate the government on the changes that have been implemented," Tofano added.
The IMF representative highlighted the importance of cooperation between institutions. Additionally, Tofano stressed the significance of the existing state investment strategy, which can coherently set project priorities, and a procurement system that collects all information and simplifies public oversight.
As a Ukrainian example of a "white elephant" in public investments, she mentioned the intentions of the authorities in one of Ukraine's medium-sized cities to build a stadium that could accommodate more people than the number of residents, simply because there was a need to spend the "military income tax" funds somewhere. However, this potential "white elephant" was "killed in its cradle" after a relevant announcement appeared in "Prozorro," the IMF representative clarified.
The Fund's mission, during the 7th review of the Extended Fund Facility (EFF) Program at the end of February this year, will also assess the action plan for reforming public investment management, Tofano added.