Programmatic Adjustment Loan 2

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The Second Programmatic Adjustment Loan (PALII) Project will continue deepening the program of achievements, in the five thematic areas of the first PAL operation: fiscal and financial Discipline; regulatory reform; creating and protecting property rights; public sector accountability; and, management of social and environmental risks. The project will encourage policy coordination - PAL provides an anchor for the pro-reform constituency in the Government and the Verkhovna Rada, it acts as a catalyst for change, and it is able to direct technical assistance to areas so requiring. Wider participation of civil society in the design, and implementation of reforms will be supported, as will the continued macroeconomic stability, through the establishment of structural reforms, crucial for growth over the medium term. Additionally, improvement of the social situation will be pursued to by reduce poverty by improving social services, and providing more opportunities for middle, and lower income households, so as to share in the benefits of economic development, both in urban, and rural areas. Consequently, the project will provide significant resources to help finance the ongoing reform program. However, political uncertainty, the pace of structural reform, and vulnerability to as yet unforeseen external economic shocks, are risks the project faces. Nevertheless, the flexibility built into the PAL design will allow focusing on opportunities, and help ensure the program's sustainability, while in addition, experience has already shown that institutional reforms tend to create demand for other institutional reforms which may be lagging. The continued relationship with the International Monetary Fund, Bank support, and that of other donors, remains extremely important for Ukraine's medium to long run health.