Ukraine will be forced to make drastic cuts to its current budget unless lawmakers adopt unpopular measures needed to secure billions of dollars in Western aid before winter sets in. This warning comes from the country's Prime Minister Serhiy Koretsky, reports „Bloomberg“, reports News.bg.
The prime minister noted that the parliamentary impasse that has been going on for several months has already delayed the receipt of aid from the European Union worth approximately $4 billion - funds that were initially expected in the third quarter. He described the state of Ukraine's public finances as "close to critical."
Lawmakers' resistance to reforms demanded by the EU and the International Monetary Fund - Ukraine's two biggest donors - comes as Kiev acknowledges a $27 billion shortfall in this year's defense budget, stemming from rising war-related costs.
The rising cost of war
Koretsky pointed out that Ukraine is often forced to use expensive missiles to shoot down sophisticated Russian drones. He cited this as one of the reasons why the cost of the war - now in its fifth year - continues to rise.
At the same time, Koretsky called on international partners to reduce uncertainty about funding by making medium- and long-term financial commitments to Ukraine.
He also defended the proposal to introduce a value-added tax (VAT) on low-value shipments from abroad.
The dispute over VAT on foreign shipments
Kiev's foreign donors are pushing for measures to curb the shadow economy, increase tax revenues and bring national legislation into line with EU standards.
The most controversial demand concerns the imposition of VAT on low-value shipments from abroad, which are currently exempt from such levies.
Critics argue that the measure would would bring in little tax revenue while increasing the financial burden on Ukrainians, many of whom rely on these shipments.
Koretsky has advocated for the tax, noting that the current system gives an unfair advantage to foreign producers.
The government has resubmitted the shipments bill to the Verkhovna Rada, urging lawmakers to pass it as soon as possible. As an alternative, the prime minister has pointed to cutting spending to a minimum.
Kiev insists on additional funding
As previously reported by “The New York Times“, Ukraine needs an additional $27 billion, but the EU does not understand the reason for this shortfall.
Separately, President Volodymyr Zelensky has called on the EU to speed up the disbursement of funds from the bloc's €90 billion loan package planned for next year. This request has raised questions among Western allies.
Prime Minister Serhiy Koretsky has already announced the introduction of strict budget savings measures. The Council of Ministers plans to save 70 billion hryvnia and direct these funds to finance the Armed Forces of Ukraine.