Restoring bonuses to Ukraine’s military may increase budget burden - IMF

This was stated by the permanent representative of the International Monetary Fund (IMF) in Ukraine Vagram Stepanyan, who spoke in an interview with Interfax-Ukraine, Ukrinform reports.

"The recently passed bill to which you refer would, as I understand it, add the equivalent of more than $4 billion in additional expenditures. However, the bill does not specify the sources of funding for these expenditures, so this could lead to an increase in the budget deficit in 2023. The search for resources of this scale would likely involve drastic short-term tax measures or substantial borrowing on the domestic financial market; however, such measures are virtually impossible without a really negative impact on the economy and financial market," IMF’s envoy said.

Stepanyan noted that loans to finance such expenses could put the sustainability of Ukraine's debt, which is already under pressure, under even greater threat.

"This emphasizes the importance of a comprehensive tax policy that allows for mobilizing domestic revenues and protects the tax base from erosion," he added.

The representative also recalled that within the implementation of the Extended Fund Facility, Ukraine seeks to ensure fiscal sustainability and predictability of the budget policy changed during COVID and due to the ongoing war. In this context, the authorities undertook to restore and strengthen the effect of Article 52 of the Budget Code, which defines and regulates the legal framework and circumstances under which amendments can be passed to the budget both in terms of revenues and expenditures.

As Ukrinform reported earlier, on April 10, the Verkhovna Rada supported the move to restore UAH 30,000 bonus payments to military personnel, police officers, and employees of the State Emergency Service. The legislative initiative is yet to be signed by the Chairman of the Verkhovna Rada and President as a draft resolution blocking the move has been registered.