IMF Mission to Ukraine Released Statement
OREANDA-NEWS. June 5,
“The government and the National Bank of
“To ensure sustainable growth and reduce financial risks,
“Economic growth is expected to slow this year, hurt by weaker demand for
“Strengthening the fiscal position is a key government objective. The supplementary budget has increased wage and pension expenditures, and targets higher revenue collection to finance this. In order to meet the government’s 1.8 percent of GDP deficit target new measures will be needed. These could include raising tax rates for high earners, ending tax exemptions, or reducing expenditures.
“The government has set an ambitious goal to achieve energy independence. Raising gas and heating tariffs for households is an essential component of any strategy to achieve this. We recommend significant upfront tariff increases and regular increases thereafter as part of a time-bound plan to eliminate subsidies. We also recommend giving more money to the poorest households to offset their increased costs. Raising prices will lower Naftogaz’s deficit, reduce imports, and free up resources for investment in domestic production and energy efficiency.
“The monetary policy stance should continue to focus on maintaining price stability. The current monetary stance is appropriate given heightened external risks. We continue to believe greater exchange rate flexibility can better serve
“The financial sector needs to be strengthened further to help revive lending and support economic growth. The banking system appears well capitalized, but further reforms are necessary to reinforce bank balance sheets, including measures to help reduce large non-performing loans.
“We recommend ambitious reforms to improve living standards and help realize