Louisa Gouliamaki/Agence France-Presse â€" Getty Images With nationalist chants and songs in Independence Square in Kiev on Wednesday, Ukrainians awaited word from their country’s new leadership. 
Peter Boone is chairman of the charity Effective Intervention and a research associate at the Center for Economic Performance at the London School of Economics. He is also a nonresident senior fellow at the Peterson Institute for International Economics. Simon Johnson is a professor at the M.I.T. Sloan School of Management and former chief economist at the International Monetary Fund.
This is an important and hopeful moment for Ukraine. While we are optimistic that it can be seized, with greater prosperity for millions of people, Ukraine has faced similar hopeful moments, and subsequent disappointment, several times in the last 20 years. This time will not be different unless Ukraine’s new rulers make a definite break with the established ways of its economic and political elite.
Without real change in how Ukrainian governance operates, the current optimism will soon return to cynical pessimism. The weakness of Ukrainian democracy has been fully exposed by events on its Independence Square (Maidan, in Ukrainian) in recent weeks. To be blunt, Ukraine needs to become much less corrupt. (According to Transparency International, Ukraine is one of the most corrupt countries in the world.)
In 1991 Ukraine’s independence seemed to promise great things - just as the breakdown of the Soviet bloc offered opportunities for countries like Poland, which embarked on a remarkable economic recovery underpinned by genuine democracy. In Ukraine, the economy started out about the same size as Poland’s but now is half the size. (Ukraine has 45 million people and a gross domestic product of around $200 billion, depending on which exchange rate you use. Poland has nearly 40 million inhabitants and a G.D.P. that is close to $500 billion.)
In 1994 the election of Leonid Kuchma offered the opportunity for a breakthrough - an argument we made at the time (with Anders Aslund) while working with the government. Sadly, the right policies were never pursued, becoming lost in a tangle of incompetence, corruption and nepotism.
The Orange Revolution of 2004-5 constituted a remarkable round of popular protest, which brought Viktor Yushchenko to the presidency, but again the results were disappointing. Viktor Yanukovych was elected president in 2010 and the disappointment only grew.
Don’t misunderstand us - the underlying economy has changed and grown over the last two decades, a point made by Mr. Aslund. Ukraine undoubtedly has the human talent and physical capital (buildings, roads and other infrastructure) to become a much more prosperous nation. But the toxic legacy of the Soviet regime remains evident with entrenched corruption, highly distorted energy prices and politicians who focus mostly on playing off potential European, American and Russian supporters.
Maidan has come to represent a group of people rising against corruption and willing to give their lives for a better-run country. This is a powerful instrument if it can be harnessed and maintained.
Nations can rid themselves of substantial corruption if there is a will and sufficiently striking action by leaders - Hong Kong, in the 1970s, and Georgia more recently, spring to mind. Every Ukrainian politician and oligarch should fear such an uprising aimed at checking corruption.
Ukraine needs an anticorruption commission, run by the people who made their names on the streets, as a watchdog against bribery, official theft and abuse of power by private individuals. It should produce detailed and completely transparent reports to the nation.
If the people running this see their role and legacy as standing up for those who died in these protests, the commission could become a powerful constraint on powerful elites. It could also recommend specific means to reduce corruption over time, making all kinds of transactions much more transparent and simplifying the tax system.
At the same time, Ukraine needs to reduce its dependence on Russia’s largess. The continuing contest between Europe, the United States and Russia for influence in Ukraine has not been in the interest of most Ukrainians.
Large implicit and explicit subsidies from Russia have often been associated with corruption in Ukraine. This is bound to occur when valuable goods, such as gas and oil, are sold at far below market prices, with politicians controlling who gets to pocket the benefits.
The implication is straightforward. Ukraine should promise to pay roughly market prices for Russian energy, while receiving transparent payments at fair prices for transport of gas across its pipelines (a major source of revenue and corruption).
The Yanukovych regime has left national finances in a dire state. The currency, the hryvnia, must be allowed to depreciate substantially; this will stem the loss of foreign exchange reserves, encourage exports and lower the country’s current account deficit. But this step, combined with the rising price of Russian energy and needed budget cuts, will be painful.
The wave of support that brings the new Ukrainian government to power will quickly be lost if the new leaders are blamed for the problems created by Mr. Yanukovych. It is critical to make these most difficult and painful decisions quickly, rather than draw them out over many months or years under the new leadership.
In this context, the International Monetary Fund and other nations need to work out a program with Ukraine in which the government is well financed and has a reasonable debt payment schedule over many years. This does not mean Ukraine should get new money to finance large budget deficits. Previous large I.M.F. loans to Ukraine, as well as bilateral loans, were squandered, leaving behind official debts, relatively low reserves and still a large budget deficit.
Ideally, apart from long-term investment financing, the Ukrainian budget should be balanced.
The I.M.F. should extend the maturity of existing debt on a path that is sustainable. Some funds could be locked into foreign exchange reserves at the central bank if this is needed to restore confidence, but there is no point in offering larger loans so that more money can be spent on subsidies, or to avoid needed spending cuts.
By harnessing the powerful anticorruption forces created at Maidan, ending the country’s debilitating dependence on foreign largesse, putting its public finance on a sustainable footing and letting popular opinion choose a path between Europe and Russia, Ukraine might get a chance to fulfill the hopes expressed by so many when the Soviet Union collapsed, a long time ago.
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