Exclusive In-depth: Ukraine’s IMF Review Delayed Until December as Tax Reforms Stall, Source Says

Ukraine’s second review under its International Monetary Fund (IMF) program has been pushed back to December and will be combined with the third after Kyiv failed to meet reform requirements, delaying its next disbursement, a government source told Kyiv Post.The setback follows another unsuccessful attempt to pass legislation tied to international financing. On Sept. 1, Prime Minister Serhii Koretskyi urged the Verkhovna Rada, Ukraine’s parliament, to approve bills he said would unlock $30 billion in partner commitments for defense and social spending. An hour later, lawmakers had failed to pass nine of the measures.JOIN US ON TELEGRAMFollow our coverage of the war on the @Kyivpost_official.That same day, IMF staff began a visit to Kyiv to discuss the 2027 budget and review economic data with officials and business representatives.Two sources described the IMF team’s mood as “sad.” They said the fund had not explicitly ruled out the next payment, but the talks were “fraught with negative expectations.” Failure to secure the disbursement could also weaken international partners’ confidence in Ukraine’s reform commitments.The government estimates that Ukraine will need $52 billion in external financing in 2027, the government source said. Finance Minister Serhiy Marchenko told Euronews that $32.6 billion remained unsecured.The government aims to finalize its estimate before Sept. 15, the source added. Another source familiar with the calculations said the IMF’s assessment of the financing gap was taking longer than usual. Other Topics of Interest Russian Strikes Could Add Up to 0.6 Points to Ukraine’s Inflation, NBU Says NBU Deputy Governor Volodymyr Lepushynskyi writes that Russian strikes on logistics and warehouses are shifting from an inflation risk to measurable economic damage, adding up to 0.6 points to prices. With the war continuing and funding needs rising, the IMF also met opposition lawmakers to discuss how to overcome the legislative deadlock.Reform deadlines slipUkraine completed June commitments on state banks and financial-sector oversight but fell behind on other reforms, according to the RRR4U consortium’s August monitoring report.The report listed legislation taxing income earned through digital platforms as awaiting the president’s signature. Measures to remove tax exemptions for low-value postal imports had not passed, while legislation on transfer pricing, which governs transactions between related companies, had only recently reached parliament.On Sept. 1, lawmakers rejected a bill and six alternatives that would remove the value-added tax (VAT) exemption on low-value imported parcels. Parliament also failed to hold a vote on appointing new Accounting Chamber members. Both issues were tied to international financing requirements.“Dear colleagues, I’m sorry,” Speaker Ruslan Stefanchuk said after the tax vote.Just weeks earlier, Stefanchuk had met Koretskyi to coordinate the passage of government legislation. “The coordinated work of the two institutions will allow us to make decisions important for the state more quickly,” the parliamentary newspaper Holos Ukrainy quoted him as saying in July.IMF meets the oppositionAsked how to overcome the failed votes, Danylo Hetmantsev, chair of parliament’s tax committee and a member of President Volodymyr Zelensky’s Servant of the People party, said the government needed to engage lawmakers who had withheld their support.“Work with the representatives who did not vote in favor and try to reach out to them,” he told Kyiv Post.“We’re on the same page with the IMF. There are no contradictions between us. The talks were tough because the situation is tough,” he added.A participant in the discussions described the IMF’s warning more bluntly.“They made clear that if we keep voting this way, no one will give us funding, and they won’t be able to help with anything,” the source told Kyiv Post.Kyiv Post learned that IMF staff met representatives of the opposition European Solidarity faction for the second consecutive visit.In an April interview with Alfred Kammer, then director of the IMF’s European Department, Kyiv Post raised opposition lawmakers’ complaints that they had not been consulted during an earlier round of talks. Kammer said the IMF generally engaged with both governing and opposition parties, but that securing parliamentary support was the government’s responsibility.European Solidarity lawmaker Nina Yuzhanina said she had proposed a permanent working group involving lawmakers, the government, the IMF and EU experts “to properly draft and prepare legislation tied to international obligations.”According to Yuzhanina, IMF Resident Representative Priscilla Toffano agreed that the group would be established, but it had not been formed at the time of publication.“For some reason, we don’t hear each other, even though it’s clear that when parliament fails to back a bill and obligations go unmet, it could be avoided through this kind of joint work,” Yuzhanina said.She cited the parcel VAT bill as an example, arguing that it would raise costs for military families importing uniforms. She said the Finance Ministry had rejected her proposal for specific exemptions and instead backed wording she considered unclear.“Raising the cost of these goods by 30% for them is wrong … I proposed [exemptions] for them specifically, but [the finance ministry] didn’t agree. It would come to around 20 line items,” Yuzhanina said.“Now the bill includes that goods sold remotely for security and defense purposes are exempt from VAT,” she added, arguing that the provision would create confusion.A harder budget for 2027The financing challenge is growing as Russian attacks damage businesses, disrupt trade and raise costs.Ukraine’s economy contracted by 0.6% year-on-year in the first quarter as Russian attacks on energy infrastructure and a harsh winter weighed on output. It grew by just 0.4% in the second quarter, according to the State Statistics Service’s revised estimate.That compares with growth of 5.5% in 2023 following a 28.8% collapse in 2022, the first year of the full-scale invasion.Annual inflation rose to 8.1% in August. Intensified strikes on logistics and retail facilities, disruption to the Black Sea shipping corridor and wartime labor shortages are adding to price pressures.Rebuilding logistics networks could add another 0.4 to 0.6 percentage points to annual inflation by the end of 2026, National Bank of Ukraine Deputy Governor Volodymyr Lepushynskyi wrote in an Interfax-Ukraine op-ed covered by Kyiv Post.Political changes in Europe could make additional funding harder to secure. On Sept. 6, Germany’s far-right Alternative for Germany (AfD) finished first in the Saxony-Anhalt state election, falling just short of a parliamentary majority.IMF Mission Chief Gavin Gray warned European Solidarity lawmakers that elections in five European countries could produce outcomes less favorable to Ukraine, Yuzhanina said, “as public opinion there is being turned against aid to Ukraine.”According to Yuzhanina, Gray also warned that corruption scandals exposed by the National Anti-Corruption Bureau of Ukraine could fuel opposition to supporting the country.Marchenko told Euronews that Ukraine faced its tightest budget situation since 2022 and that he was preparing the 2027 budget on the assumption that the war would continue.Another push to use Russian assetsSince the full-scale invasion began, Ukraine has relied on US grants, European and G7 loans, financing backed by earnings on frozen Russian sovereign assets and reform-linked support through the EU’s Ukraine Facility.Kyiv is now seeking additional financing linked to the frozen assets themselves, although European governments remain divided over the financial and legal risks.A person familiar with the discussions estimated that the EU holds up to €210 billion ($244 billion) in frozen Russian sovereign assets, including about €180 billion ($209 billion) at Belgium-based securities depository Euroclear.The source pointed to the G7’s $50 billion Extraordinary Revenue Acceleration (ERA) loan initiative, which uses earnings on immobilized Russian sovereign assets to repay the loans, and argued that the assets could support further financing.“But we can discuss using a larger amount as ‘collateral,’” the source said.The EU’s separate €90 billion ($105 billion) Ukraine Support Loan is being financed through joint borrowing. It was approved for 2026 and 2027 and has not been disbursed in full, according to Euronews.“There’s a chance for bilateral loans from G7 countries, similar to the direct budget support the US used to provide. The EU isn’t planning to give us more next year,” the participant in the IMF discussions told Kyiv Post.The EU already has payments scheduled for 2027 under its existing loan. The question is whether it will agree to additional support.Approaching Japan, Norway and Canada for bilateral loans would amount to “scraping the bottom of the barrel,” the person familiar with the financing discussions said.“Theoretically, it’s possible to work with the Belgians – to meet the demands that other European countries and the European Commission were unwilling to meet last year,” the person added.In November 2025, Belgian Prime Minister Bart De Wever said Belgium’s support for using Russian assets would depend on EU countries sharing potential legal liabilities, providing “full and signed guarantees” and addressing risks to the euro, according to a letter to European Commission President Ursula von der Leyen.Ukraine’s Finance Ministry is preparing discussions with the EU’s Economic and Financial Affairs Council (ECOFIN) and plans further negotiations at the IMF-World Bank Annual Meetings in October, the government source said.Ukraine also needs funding to support businesses damaged by Russian strikes, including through an updated insurance mechanism. Yuzhanina said frozen Russian assets were again being considered as a source of backing.“I realize that this is the only resource we all turn to for every purpose. But Ukraine finds itself in a situation where, well, there’s no other way,” she said.