Unlocking Ukraine’s Economic Potential: A Joint Strategy with the U.S.

In the 33 years since Ukraine gained independence, its economy has not become market-based or free. Political and business elites have preserved the post-Soviet structure of capital and employment. Ukraine is very poorly integrated into the regional and global division of labor system. The share of exports in goods is approximately 22% of GDP, and imports make up approximately 40% of GDP. In terms of accumulated direct foreign investments per capita, Ukraine is the worst country in Europe. We are also the poorest country in Europe based on GDP per capita.

The Ukrainian economy is characterized by strong internal and external protectionism, widespread discriminatory practices, and nomenclature favoritism. In essence, the Ukrainian economy, with a non-market sector comprising 65-70% (government expenditure), is state-controlled and centrally planned. These facts are the root causes of corruption, which pushes businesses into the “grey” economy, which accounts for approximately 50% of GDP.

Ukraine is experiencing an acute deficit in economic freedom (150th place globally in the 2024 Economic Freedom Index). We have very weak institutions for protecting property rights (102nd place in the 2024 International Property Rights Index, 88th in the 2024 Rule of Law Index). Ukraine is characterized by low-quality public governance. In the 2024 Governance Indicators from the World Bank, Ukraine received a score of 37.74% for “government effectiveness” (the best score being 100%), 43.4% for “regulatory quality,” and 19.81% for “rule of law.”

Taking Christian values, freedom, property, and the pursuit of happiness as the foundation of economic policy within a democratic, small state;
Adequately assessing the low quality of managerial capacity and capital (capacity), the merger of the executive structure of national and local government with both legal and shadow businesses;
Considering the acute deficit of quality judicial and law enforcement services in economic relations, as well as the very low level of trust in all branches of government, including the judiciary;
Taking into account the positive experiences and mistakes of transition countries in Europe and Asia after the collapse of the Soviet Union;
Based on the achievements of modern economic science and the experiences of countries that have demonstrated the phenomenon of the “economic miracle”;

We, a team of committed supporters of Christian, Western values, the free market, and capitalism, propose conducting comprehensive, systemic, market reforms in Ukraine to create a private, free, competitive economy integrated into the regional and global division of labor system. Our aim is to simultaneously reboot both the governance system and the economy. We propose implementing a full-fledged partnership between society, business, and government based on the principles of freedom, responsibility, and solidarity. Below are the key actions and decisions.

I. Public Administration

1. Conducting a Constitutional Reform: Adoption of a Declaration of Independence, a new Constitution with a clear division of powers between the President, Government, and Parliament.
2. Adoption (as part of the Constitution or as a separate constitutional law) of the “Straightjacket for the State”. These are six restrictions with upper limits/thresholds that will be mandatory for government bodies:
   1. Government expenditure size – maximum 25% of GDP;
   2. Volume of state-owned property – maximum 15% of GDP;
   3. Inflation – maximum 2% per year;
   4. Budget deficit – maximum 2% of GDP per year;
   5. National debt – maximum 20% of GDP (medium-term perspective);
   6. Employment in the public sector, including the armed forces – maximum 15% of the labor force.
3. Adoption of a New Cabinet of Ministers Structure consisting of eight ministries:
   1. Ministry of Defense,
   2. Ministry of Internal Affairs,
   3. Ministry of Finance,
   4. Ministry of Foreign Affairs,
   5. Ministry for the Management of State Property and Privatization,
   6. Ministry of Justice,
   7. Ministry of Social Solidarity,
   8. Ministry of National Security.
      A special government institution is the National Bank.
      Approval of the structure of each ministry, its KPIs, budget, operational regime, and reporting.
4. Establishment of Clear Division of Powers, Responsibilities, and Resource Base between national and local government bodies.
5. Establishment of a Control Regime over the activities of all government administration bodies.
6. Elimination of Duplication of Functions of government administration bodies with the corresponding adjustments to the budgets of these bodies.
7. Withdrawal of All Ministries and Local Executive Bodies from the composition of founders of all commercial entities, and introduction of a ban on the establishment of new commercial entities by government bodies. The management of state property and assets is carried out by the Ministry for the Management of State Property and Privatization.
8. Development at the Local Level of a Mechanism for Targeted Social Assistance to citizens who are at potential risk of losing property (unemployed, large families, pensioners, disabled persons), monitoring of targeted social assistance programs, and partnership of regional authorities with civil society and religious organizations.
9. Adoption of a Law on Public Procurement, which creates institutions and mechanisms for public procurement based on the following principles: accountability of all government bodies, integrity and fairness in conducting tenders and fulfilling their conditions; transparency of decision-making and financial flows, open competition for the right to produce and deliver goods and services ordered by government bodies and state-owned enterprises, uniform procedures and practices for all commercial organizations.
10. Adoption of Effectiveness Criteria for State and Local Government Bodies in the following areas:
    1. Economic growth,
    2. Efficiency in managing budgetary resources,
    3. Development of competition,
    4. Investments,
    5. Foreign trade,
    6. Energy, water supply, heat supply, and other utilities,
    7. Education,
    8. Healthcare,
    9. Social standards.

II. Money and Finance

1. Introduction of a Multi-Currency Regime: Elimination of all restrictions on the use of foreign currencies ($ – US Dollar, € – Euro, Polish Zloty, Swiss Franc, £ – British Pound) alongside the Ukrainian Hryvnia. A possible option is dollarization of the economy, i.e., switching to the US Dollar or using the Dollar as a legal tender.
2. Lifting Restrictions on the Movement of Funds across the current and capital accounts of the balance of payments.
3. Abolition of “Manual” Price Regulation by government bodies on all goods and services, except for services provided by monopoly producers (housing and utilities, public transportation, etc.).
4. Free Formation of the ₴-Hryvnia Exchange Rate against foreign currencies.
5. Allowing the Use of Electronic Payment Instruments (e.g., Bitcoin) in domestic and international transactions.
6. Abolition of All Restrictions on the Use of Cash in all payment transactions.
7. Introduction of a Simplified Procedure for the registration of financial intermediaries (banks, financial companies, funds) to provide financial and payment services to business entities, based on a notification principle.
8. Creation of a Free Market for Gold, Precious Metals, and Gemstones. Removal of legal and administrative restrictions in this segment of the economy.
9. Exit of the State from Shareholding in Financial Organizations and Banks: Full privatization of banks and insurance companies to create conditions for open competition in the financial services market, ensuring equal competition between Ukrainian and foreign companies in the financial services market, and eliminating conflicts of interest in the financial services market.
10. Establishing a Single Goal for the National Bank – an inflation target of 0–2% per year. Inclusion in the “National Bank Law” of a provision stating that if the country exceeds the established inflation target for two consecutive years, the Chairman of the National Bank automatically resigns.

III. Budget and Taxes

1. Introduction of a Budget Rule: The maximum level of government administration expenses – 25% of GDP (reaching this level 3-5 years after the end of the war), the maximum/threshold level of state debt – 20% of GDP (reaching this level 5-7 years after the end of the war).
2. Introduction of a Law: Local government authorities must have balanced local budgets. If the norm of a balanced budget is violated for two consecutive years, the head of the local authority automatically resigns.
3. Establishment of Clear Quantitative and Qualitative Criteria to assess the effectiveness of government spending across all types of budgetary expenses.
4. Abolition of All Extra-Budgetary Funds, including the Pension Fund. Transfer of the state’s pension and social obligations to the state (central) budget. Implementation of the principle “all budgetary revenues are used to fulfill all state obligations” within the framework of the established protected items of the budget and its priorities.
5. Transition to an Innovative Tax System:
   1. Retail turnover tax: A single flat rate of 15% applies to all goods and services without exception.
   2. Excise taxes on producers of electricity, gas, mineral products, alcoholic beverages, and tobacco products at rates that ensure a balance of interests between producers, importers, and consumers, as well as the elimination of the shadow economy in these sectors.
   3. Personal income tax (flat rate): A single tax rate of 10%. All other taxes and fees are abolished.
6. Introduction of a Unified, Flat Import Customs Duty Rate of 5% on all goods and services. Exports of goods and services are not subject to duties. In the extraction of mineral resources, a flat land/resource rent rate will be introduced.
7. Change in the Structure of Government Finance Management: Merger of the Ministry of Finance, the State Customs Service, the State Tax Service, the State Fiscal Service, and the State Export Control Service into a single body – the Ministry of Finance.
8. Conducting a Tax Amnesty: Every citizen of Ukraine has the right to deposit any amount of money in any currency in a Ukrainian bank without paying taxes on those amounts.
9. Conducting an Amnesty for All Economic Offenses committed before 2022, except those related to activities in favor of the enemy, the Russian Federation.
10. Conducting Large-Scale Privatization: The preferred form of privatization is the monetary privatization of resources and assets through open competitions/auctions. Large state-owned commercial organizations, including banks, railroads, insurance companies, and energy assets, will be privatized with the assistance of specialized, reputable companies from Ukraine’s partner countries.

IV. Business Climate, Regulatory Competitiveness 

1. Establishment of the Basic Principle of Good Faith in Business Legislation: A business entity cannot be punished by government authorities (confiscation, account blocking, funds withdrawal, property arrest) until its guilt is established through the legally prescribed process.
2. Abolition of Regulatory Acts That Violate the Principle of Equal, Open Competition and Limit Economic Freedom: This will involve a review of the regulatory framework and the introduction of a “regulatory guillotine,” i.e., a broad-scale deregulation.
3. Establishment of a Government Regulation Rule: New regulatory acts will only be introduced if there is a scientifically substantiated analysis and assessment of their contribution to ensuring fast, long-term economic growth with a high level of economic freedom.
4. Prohibition of Inspections by Government Control Authorities concerning business entities whose activities pose no or minimal risks to consumer health and safety.
5. Introduction of a Legislative Norm to Exempt Business Entities from Responsibility for Minor, Insignificant Offenses: Business entities and the affected parties (individuals or organizations) will have the right to independently determine the mode of compensation for damages, including through mediation and private arbitration mechanisms.
6. Introduction of the Principle of Tacit Approval in Legislation: This allows a business entity to undertake certain actions without obtaining the approval of the regulatory authority for the issuance of licenses, permits, or certificates, provided that the authority does not send an approval or refusal within the prescribed period.
7. Review of the Volume, Content, and Frequency of Official Statistical Reporting: Reducing the amount of mandatory data to be submitted to government authorities.
8. Expansion of the Use of the Self-Regulation Principle in Commercial Activities: Encouraging participation in industry organizations, associations, and the adoption of their rules, norms, standards, and codes of conduct in the market.
9. Creation of a Special Regulatory Regime for the Self-Employed, Micro, and Small Businesses: Abolition of all licenses, permits, certificates, and approvals, except in areas directly related to national security.
10. Transition Exclusively to a Digital Format for Relations Between the Government and Business Entities: Ensuring legal, organizational, and technical capabilities for electronic document flow.
11. Adoption of a New Labor Code: Creating a flexible labor market, reducing transaction costs for opening and closing jobs while forming a new market structure of capital and employment.

V. Pensions and Targeted Social Support System

1. Modernization of the Targeted Social Support System in Ukraine based on two principles: 1) Monetization of all benefits, subsidies, and services provided to various categories of the population, 2) A targeted approach to determining the beneficiaries of social support based on clear criteria.
2. Introduction of the Following Criteria for Targeted State Social Support: 1) Level of monetary income, 2) Health status (presence of disability), 3) Presence of non-monetary income, 4) Presence of dependents, 5) Level of education, 6) Amount of savings, 7) Presence of housing, assets, land, and real estate.
3. The Maximum Amount of Monthly State Financial Social Assistance is set at an equivalent of $300 for three years after the war ends.
4. Transition to an Unconditional Basic Pension Income System for all Ukrainian citizens who have reached the age of 63. The amount of the monthly unconditional basic pension income is determined annually when adopting the state budget law, based on available resources and the adherence to macroeconomic stability, but not lower than $180 equivalent.
5. Granting Non-Cuttable Status to Pension Payments: Implementation of the principle “All state revenues are used to fulfill all state obligations.” Inclusion of the state pension fund in the state budget.
6. Introduction of a One-Time Payment from the State Budget in the Event of a Citizen’s Death (Funeral Payment) in the amount of an equivalent of $5000, if the citizen has paid pension contributions to the state pension fund for 20 years or more.
7. Implementation of the Voluntary Principle of Private Pension Insurance: Every citizen of Ukraine entering the workforce, as well as those who are at least 20 years away from retirement age, must open an individual pension savings account in one of the private pension funds or authorized financial organizations managing such accounts.

VI. Education and Healthcare

1. Ensuring the Autonomy of Higher Educational Institutions through the following measures: free transfer of all assets, property, and land to the balance of state universities, transforming them into open joint-stock companies (OJSC), and granting them authority over their activities.
2. Ensuring the Autonomy of Primary and Secondary Schools: Transforming primary and secondary schools into open joint-stock companies (OJSC), allowing them to independently determine their operating schedules, relationships with teachers, select programs and textbooks, evaluation systems, relations with parents, sponsors, etc. Transfer of 100% of shares of primary and secondary schools to local government authorities. Creation of a mechanism for selling up to 50% of shares to private commercial structures and individuals.
3. Abolition of the Ministry of Education: Creation of the Agency for the Market of Educational Services, transferring state property managed by the Ministry of Education on behalf of the state to the management of the Agency for Privatization and Management of State Property.
4. Introduction of Education Vouchers: Transition from school funding to student funding, implementing the principle “money follows the student.” Parents of all school-age children will receive a voucher for an equal amount.
5. Expanding the Practice of Issuing Education Loans: Higher educational institutions may act as guarantors for student loans for higher education. Establishing government scholarships for the best students to study abroad.
6. Adoption of a Plan for the Privatization of Higher Educational Institutions: Within six years after the war, all higher educational institutions will be privatized. The state may remain a shareholder in specific higher educational institutions, as determined by the government, but will own no more than 25% of the shares.
7. Transition to a System of Individual Accumulative Insurance Medical Accounts: Funds for these accounts will be formed by monthly contributions from citizens at a rate of 3% of their monthly salary, as well as annual budget transfers. Funds from these accounts can only be used to purchase medical services. Funds in these accounts will accumulate throughout a person’s life and be passed on to heirs.
8. The Amount of State Budget Financial Transfers to Individual Accumulated Medical Accounts will depend on factors such as the citizen’s health status, income level, savings, lifestyle (smoking, alcohol consumption, sports activity), type of work, and the state’s budgetary capabilities. The state will cover 100% of the cost of medications for patients with diabetes and other diseases as determined by the Agency for the Market of Medical Goods and Services.
9. Transformation of All State Health System Structures (clinics, hospitals, laboratories, scientific medical centers) into Open Joint-Stock Companies: Their shares will be transferred to local government authorities. Shares of nationwide scientific medical centers and specialized hospitals will be transferred to the balance of the Agency for Privatization and Management of State Property. All medical institutions will gain full economic independence and the right to engage in commercial activities.
10. All Healthcare Service Providers Will Compete in Open Competition for the Right to Provide Services to consumers across the entire country, regardless of location. Within five years after the start of the healthcare reform, local authorities will sell up to 75% of shares in medical organizations under their balance. Full privatization of healthcare institutions owned by local authorities will be completed within ten years.