Ukraine may raise taxes if it doesn't get US financial aid – Bloomberg
Ukraine is developing a plan to help it obtain the necessary funds and cover the budget deficit if US financial assistance is blocked.
Source: Bloomberg, citing its sources
Details: The plan includes three key elements: expanding domestic bond sales, raising taxes, and cutting spending.
Bloomberg noted that Ukrainian officials are due to propose this plan to the IMF during a three-day visit of its staff to Kyiv next week.
"While Ukraine is fulfilling its obligations, the finance ministry and central bank believe there’s a risk that the IMF’s board won’t approve the next loan disbursement without the fiscal plan if US funds are still blocked. Kyiv has been scheduled to receive $5.3 billion from the IMF program this year," Bloomberg reported.
Bloomberg stated that the primary source of funds to replace US funding is the expansion of domestic government borrowing. Ukrainian banks have high levels of liquidity, and the government expects them to continue investing in high-yield government bonds.
This could bring in at least US$5 billion in revenue this year. The government can also raise taxes or cut spending if necessary.
Background:
- On 8 February, the US Senate took a step towards passing a package of aid to Ukraine, Israel and Taiwan. The bill envisages US$61 billion for Ukraine to support its efforts to counter Russian aggression.
- In addition, on 1 February, EU leaders reached an agreement to provide macro-financial assistance to Ukraine, totalling €50 billion.
- However, Johan Van Overtveldt, Chairman of the European Parliament's Budget Committee, believes that the €50 billion approved in EU aid to Ukraine is insufficient.
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