Kyiv may not receive an IMF loan due to Yaresko’s position – Reuters
The Ukrainian parliament and the Ministry of Finance are close to an impasse over the planned tax cuts, said Reuters legislator Nina Yuzhanina. The lack of agreement between parliamentarians and Finance Minister Jaresko threatens reforms that are critical to unlocking another $4 billion in international loans.
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The agency reports: “Ukraine has promised to rebuild its tax system to meet the requirements of the International Monetary Fund for the rescue program in order to strengthen its finances...”
“A critical situation is emerging, we may find ourselves in a dead end,” Yuzhanina, who heads the parliamentary committee on tax and customs reform, told the agency. Parliamentarians have not yet even met with Finance Minister Yaresko to agree on tax reform.
These disagreements in the draft budget for next year could lead to the IMF blocking the next tranche of $1,7 billion and another $2,3 billion from the United States and the European Union, the receipt of which also depends on the decision of the IMF.
“The budget will be presented to parliament only together with tax reform. The government does not see the point in approving the budget when the coalition does not have a unified approach to tax reform,” said Deputy Prime Minister Vyacheslav Kirilenko.
While Parliament is pushing for tax cuts across the board, the Treasury Department is focused on cutting high payroll taxes and simplifying the tax code.
Under the IMF program, Ukraine must balance lower tax rates with corresponding spending cuts to achieve a target budget deficit of 3,7% of gross domestic product in 2016, compared with this year's deficit level of 4,1%.
An imbalance in the position on tax reform between Minister Yaresko and the Verkhovna Rada may lead to the impossibility of tax reform in parliament and budget imbalance, which will impede obtaining a loan.
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