Ukraine passes key laws to help unlock billions in aid from EU, IMF

Ukraine Enacts Crucial Legislation to Access Billions in EU, IMF Financial Support

Ukraine Passes Key Reforms to Secure International Financial Aid

Legislative Measures to Meet EU and IMF Demands

KYIV, Oct 15 (Reuters) - Ukraine's parliament passed a package of legislation on Thursday to advance the implementation of key demands from the European Union and the International Monetary Fund to unlock billions in foreign aid.

Economic Challenges Amid Ongoing War

Budget Crisis and Revenue Shortfalls

As the war with Russia is in its fifth year, Ukraine faces a budget crisis driven by a huge military funding deficit, stalled economic growth, and domestic revenue shortfalls due to intensified Russian strikes on businesses and infrastructure.

Details of the New Legislation

Lawmakers approved bills to raise taxes on foreign parcels, increase e-commerce transparency, and amend financial monitoring rules for politicians.

Finance Minister's Statement

"The laws approved today establish a modern model for the taxation of e-commerce, which is in line with the European Union’s approach and is fair to domestic businesses," said Finance Minister Sergii Marchenko.

"The reform is also part of the cooperation programme with the IMF and a condition for macro-financial support from the EU."

Dependence on Western Financial Support

As the war gets more expensive and demand for weapons, drones and ammunition continues to grow, Ukraine is struggling to cover its defence spending with domestic revenue and crucially depends on financial aid from its Western allies.

Impact on Domestic Spending and Revenue

Last month, the government was forced to delay some of the budget spending – like reconstruction work and preparations for winter – due to a budget liquidity crisis. Domestic tax revenue fell by 32 billion hryvnias ($711 million) in August and September as Russia intensified its strikes on the Ukrainian infrastructure, logistics and businesses.

Government Response and Outlook

Prime Minister Sergii Koretskyi said that the results of this week's parliamentary work gave the government cause for optimism, but there was still a lot of work to do to meet all the requirements of the country's lenders.

For the remainder of this year, Ukraine has around $29 billion available in EU financial support waiting for continued disbursement.

Implementation and Expected Outcomes of New Tax Rules

The finance ministry said that the new rules for foreign parcels, introducing a 20% value-added tax, would take effect no earlier than July 2027. It was expected to generate an additional 20-30 billion hryvnias in budget revenue, lawmakers estimated.

(Reporting by Olena Harmash, Editing by Alex Richardson)