Ukraine Budget Vote Seeks to Clear Way for Next IMF Trancheby
Payments from $17.5 billion bailout were held up over budget
Parliament postpones discussions of new tax code into 2016
Ukraine’s parliament approved next year’s budget as it seeks to clear the way for the government to receive delayed funds from a $17.5 billion bailout to help the economy recover from recession.
The budget, a compromise between lawmakers and the cabinet, was passed by 263 votes in the 450-seat legislature. It envisages a shortfall of 3.7 percent of gross domestic product, in line with demands set out by the International Monetary Fund.
“The budget approval is an important step to receive the next tranche from the IMF and other international financial aid linked to it,” the Finance Ministry said early Friday in an e-mailed statement as debates dragged on until 4 a.m. in Kiev. “However, the IMF’s experts will analyze separately whether the budget meets IMF program criteria.”
Discord over the budget and a new tax code had become symbolic of squabbling within Ukraine’s ruling pro-European coalition, which took power after street protests ousted the nation’s former pro-Russian leader in 2014. The IMF said last week a budget that doesn’t meet its requirements would risk interrupting the flow of cash. That uncertainty has sent bond prices lower, curbing optimism after a restructuring.
The yield on Ukrainian government debt due 2019 has surged more than a percentage point to 10.091 percent since the securities were first traded Nov. 17, after private investors accepted a write-down on the value of the bonds they held. The yield declined from 10.112 on Thursday, according to Bloomberg data.
Ukraine, whose economy grew a quarterly 0.7 percent between July and September after 18 months of contraction, now expects to receive $1.7 billion of IMF aid in the coming weeks. The disbursement, delayed from October, opens the way to raise $3.3 billion in external financing, including a $1 billion loan guarantee from the U.S.
“I do realize that it is not the best budget,” Prime Minister Arseniy Yatsenyuk said, addressing the parliament. “I do realize that we will need to work more not only on this budget but also on all reforms, including tax, medicine, education. We will be able to carry out reforms if we are united.”
A cabinet reshuffle is possible after the budget approval. Volodymyr Hroisman, the speaker of parliament, said the issue of reforming the government and bringing in new people is timely but the ruling coalition hasn’t discussed it yet, the Interfax news service reported.