IMF Eyes $8.1B Ukraine Loan, Demands VAT Reform
Isaac BennettIMF nears $8.1B Ukraine loan approval, tied to a critical VAT reform facing domestic resistance.
The International Monetary Fund (IMF) is preparing to seek board approval for a new $8.1 billion lending program for Ukraine within weeks, according to Managing Director Kristalina Georgieva. The announcement signals a major step in securing critical funding for the war-torn country's economy.
Speaking after high-level meetings in Kyiv with Ukrainian President Volodymyr Zelenskiy and other senior officials, Georgieva emphasized that while the fund is adapting to Ukraine's evolving situation, the core requirements of the program remain firm.
IMF Managing Director Kristalina Georgieva discussed the terms of a new lending program during a visit to Kyiv.
"I'm here to see how the country is doing in these unusually harsh times, because I want to make sure that what was agreed in November is implementable as it was agreed," she said. "We recognize that the direction to travel remains the same (but) the way we take these steps, we have to calibrate carefully."
The Key Condition: Ending VAT Exemptions
A central condition for the new program is Ukraine's commitment to press forward with removing a value-added tax (VAT) exemption for consumer goods, a policy that has faced domestic resistance. Georgieva described the reform as a "must-have" requirement.
However, the IMF is showing some flexibility on the timeline. Before the new program can be approved, the fund will only require that the measure is introduced in parliament, not that it has already been passed into law.
"On the VAT exemptions, we made it very clear that this has to happen," Georgieva stated. "We cannot possibly have the Ukrainian economy lingering between market economy and non-market economy."
A Non-Negotiable Step Toward a Market Economy
The IMF chief stressed to Ukrainian officials that the VAT reform is non-negotiable and essential for the country's long-term economic health and strategic goals.
"I was very clear. You know, this, you cannot touch it," Georgieva explained. "You need it for you. You need it for EU accession. You need it to attract the private sector to make the business environment more conducive."
The fund plans to assess which required measures can be implemented quickly and which need to be "calibrated" more carefully given the circumstances. In a sign of this calibrated approach, the IMF is discussing a one-year timeframe for Ukraine to build the necessary parliamentary support to pass the controversial tax law.
