Risks to the IMF Loan Program
Ukraine is at risk of losing a new $8.1 billion loan program from the International Monetary Fund (IMF) due to its failure to meet four prior conditions. The resolution of this issue must be passed in February for funds to arrive in April. Without this IMF program, the European Union will be unable to provide a €90 billion loan. This financial support is crucial for Ukraine's wartime economy and post-war reconstruction plans.
The IMF has demanded three tax initiatives that must be passed into law. The first set of conditions includes:
- extending the 5% military levy into the post-war period;
- imposing customs duties on all international parcels regardless of their value;
- taxing the income of individuals from digital platforms, affecting those who sell via OLX, taxi service drivers, and others.
The second set of conditions concerns a draft law on Value Added Tax (VAT) for individual entrepreneurs (FOPs) with an annual income exceeding 1 million UAH.
However, lawmakers are sabotaging the vote on these tax initiatives. A majority of members of parliament refuse to support the first three tax measures for several reasons, including dissatisfaction with what they call a 'witch hunt' by the National Anti-Corruption Bureau (NABU) and the Specialized Anti-Corruption Prosecutor's Office (SAPO). The potential for elections following peace talks in Abu Dhabi is also influencing their decision.
Prime Minister Yuliia Svyrydenko refuses to submit the VAT bill for individual entrepreneurs to the Verkhovna Rada, and President Volodymyr Zelenskyy opposes introducing VAT for small businesses. The VAT bill would affect approximately 660,000 small entrepreneurs, causing significant concern among deputies. MP Olha Vasylevska-Smahliuk publicly confirmed the threat that lawmakers will not support bills tied to donor obligations until NABU 'calms down'.
Head of the tax committee, Danylo Hetmantsev, commented on the situation, noting that not everyone in the Rada is still thinking about the country, and once the election situation clarifies, politicians may stop thinking about the country altogether. Meanwhile, the draft law on the 'OLX tax' (No. 14025) is being taken as a basis, with a plan to vote on it in the first reading on February 10. The Ministry of Finance intends to submit amendments to the VAT bill for FOPs for Cabinet approval, specifically to raise the threshold from 1 million to 4 million UAH.
Status of IMF Negotiations
Discussions with the IMF regarding the FOP bill are ongoing, and approval of the program by the IMF's executive board is unlikely by the end of February. Under an optimistic forecast, this may not happen before March. In April, Ukraine could receive the first tranche from the IMF and credit support from the EU. April is the final deadline for partners to begin disbursing funds.
Finance Minister Serhiy Marchenko could face the consequences for failing to meet the conditions. On the eve of February 10, there was no clarity on what would be submitted for consideration or on the availability of votes. The services Uklon, Bolt, Uber, and Glovo have stated their support for government draft laws No. 14025 and No. 14026.
The situation surrounding the IMF loan program reflects the complexity of the political context in Ukraine, where legislative initiatives face resistance from lawmakers and the influence of anti-corruption bodies. Delays in meeting IMF demands could have serious consequences for the country's economic stability and its ability to obtain financial support from international partners.
At a time when Ukraine requires external financing, the timely adoption of the necessary bills is critically important for maintaining the economic situation and ensuring further integration with the European Union.