Ukraine vows to tighten fiscal policy to get IMF loan

Kiev will have to boost tax revenue and tackle corruption to receive $20 billion in loans

Ukraine has pledged to revise its fiscal policies in a bid to access $20 billion in loans from the International Monetary Fund (IMF), according to a memorandum signed by both sides, Bloomberg reported on Friday.

Kiev has been pushing for a deal with the IMF since autumn. Earlier this month, the US-based institution approved a four-month Program Monitoring with Board involvement (PMB) for Ukraine. Though the deal does not provide cash to Ukraine, it will "catalyze" external financing if successfully completed.

To tap the funding, Kiev must meet “program targets” by boosting the tax collection, improving corporate governance at state-run companies, and reducing the central bank’s support of the budget. The PMB requirements also include “transparent and competitive” selection of a supervisory board for Ukraine’s state-owned energy major Naftogaz, according to the memorandum published on the IMF’s website.

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Among other amendments to the country’s tax legislation, the IMF requires Kiev to cancel an exemption that was granted to small-sized businesses at the beginning of the military conflict. Under the monitoring program, the IMF wants Ukraine to implement “prudent policies” and more broadly to tackle corruption.

“Strong implementation of the PMB should help pave the way toward a possible full-fledged IMF-supported program,” the document says.

The first review of Kyiv's progress is scheduled for the end of January, the IMF's mission chief for Ukraine, Gavin Gray said, adding that the fund estimates the country will need between $40 billion and $57 billion in external financing in 2023.

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