Ukraine has made some real progress on the reform front and two key reforms are on the docket for this year: land ownership liberalization and pension reform that could transform the country.

However, it is becoming increasingly clear the country’s elite have no interest in dealing with corruption as this is the system that sustains them. This includes President Petro Poroshenko, who has simply adopted the old system as a control system in lieu of non-existent functioning institutions. This will cause problems as the country’s donors are insisting on a sincere fight against corruption as a prerequisite for more financial aid. However, as Ukraine has become a proxy for a low watt military clash between Russia and the US the donors cannot withdraw either. Poroshenko has being playing this card consistently, but it also means the Ukrainian president also has no motivation in seeing the Minsk II process completed.

The conflict with Russia is effectively frozen. While the US state department is still issuing tough statements, it appears US president Donald Trump has little interest in Ukraine, which can expect token support from the US going forward.

On the economic front the nadir has passed and the economy grew strongly in the fourth quarter of 2016, but growth has slowed since then. This year the government were predicting growth on the order of 2.5% but a economic blockage on the Donbas could cut on point off that number.

The trade deficit has been shrinking thanks to higher metal prices, but country will still book a $4bn-plus deficit this year. Still, the improving financial stability of the economy was improved further by the IMF’s decision to release another $1bn tranche, the first this year and long overdue. However, it is unlikely that it will release another tranche anytime soon unless real progress is made on the land and pension reform fronts – both extremely difficult and politically sensitive reforms.

However, with nearly 4 months of import cover in terms of reserves the currency is now stable and the conditions are there to start sustained growth. The government at this point may abandon the annoyingly difficult to get IFI money and has already said it intends to tap the much easier to please international capital markets with a Eurobond issue this year. It will also have another go at selling some big and value SOEs, but oligarch interference in these deals make them hard to pull off or attract any genuine foreign investors.