Web_Ukraine_iStock_000078578589_Large.jpg
Independence Square in Kiev, Ukraine
Yesterday’s submission of proposed tax reforms and a draft budget in line with objectives of the IMF’s programme for the country sparked a disagreement within the country’s parliament that the IMF said amounted to an “effective rejection” of the proposals.
David Lipton, first deputy managing director of the IMF, said the fund was concerned about potential disruption to the agreement.
The proposed budget would work to reduce the government’s deficit from 4.1% to 3.7%, with measures including an increase in revenue by widening the tax base.
Lipton highlighted this as a “key condition” of the IMF’s programme.
“Approval of a budget that deviates from programme objectives for 2016 and the medium-term will interrupt the programme and inevitably disrupt the associated international financing,” he said.
The IMF programme in Ukraine has also been threatened by disputes over the status of a $3bn eurobond purchased from Ukraine by Russia.
Russia argued the eurobond constituted official bilateral credit, meaning if Ukraine was to fall into arrears on its debt the IMF’s policy would prevent it from providing further financial assistance.
That is however until last week, when the IMF announced a change in its policy that now allows it to continue to support countries who fall behind on their payments to bilateral creditors.
The IMF announced yesterday that it does consider the eurobond to class as official government-government assistance.
