IMF raises alarm over aid to Ukraine with Parliament in gridlock

WASHINGTON – The International Monetary Fund (IMF) raised concern about Ukraine’s ability to continue receiving aid from its US$8.1 billion (S$10.36 billion) package as lawmakers stall on measures needed to release the financing, its representative said.

The Ukrainian Parliament has until the end of March to pass a series of legislative amendments that would raise taxes on businesses and households under the latest four-year loan programme approved in February. 

But the lawmakers have so far failed to debate several of the changes requested by the IMF in an expression of defiance against President Volodymyr Zelensky, potentially plunging Parliament into paralysis.

The measures are highly unpopular among the general public in the fifth year of the war, but must be adopted to unlock the rest of the funding.

Kyiv has already received US$1.5 billion from the latest programme.

“I can say that I am concerned,” the IMF’s Resident Representative in Ukraine Priscilla Toffano told Bloomberg on March 16.

The IMF’s staff, led by the mission chief Gavin Gray, is set to meet Ukrainian lawmakers starting on March 18, according to a person familiar with the matter, who declined to be named discussing private deliberations.

The Washington-based lender is Kyiv’s second-largest foreign donor. 

The latest tensions take place as Ukraine risks running out of money in a matter of months after Hungary and Slovakia vetoed a European Union loan package worth more than €90 billion (S$132.14 billion) in a dispute over oil supplies. 

In the worst-case scenario – if the money doesn’t materialise – the central bank may have to lend directly to the Finance Ministry to help fill the gap, as it did in the first year of the full-scale invasion, Governor Andriy Pyshnyi told Bloomberg in an interview last week.

That makes the IMF funding all the more urgent. 

Mr Zelensky said on March 14 that he was “ready to discuss with parliamentary representatives amendments to the mobilisation law so that deputies can go to the front”, effectively threatening them with the draft unless they comply. 

“If you do not serve the state in parliament, then serve the state on the front lines,” he told reporters in Kyiv.

The conflict is the clearest sign yet that the president can no longer take his parliamentary majority for granted.

Ukrainian lawmakers, including those representing the opposition, have largely supported the government since the start of Russia’s war.

But that situation may be changing. 

“Unfortunately, opposition members are not adding their votes for various important Bills,” Mr Zelensky said. “Even on laws that are not urgent, it is always necessary to negotiate with opposition forces, to persuade them over a long period.” 

Many lawmakers are planning to step down, the president said without elaborating.

The amendments that are up for approval by Parliament include one that would impose value-added tax on households and companies registered under the simplified tax regime.

Another request concerns lowering the threshold for taxing foreign parcels. BLOOMBERG