International Monetary Fund officials recommended that Ukraine be denied millions of dollars in loans because the government has failed to increase tax refunds.
ment has failed to increase tax refunds to investors.
IMF officials criticized the government for reversing earlier progress by allowing value-added tax arrears to exceed levels at the beginning of the year.
"The failure to refund VAT on a timely basis undermines tax compliance and the rule of law at a significant cost to domestic and foreign investors," the IMF officials said in a statement after a nine-day visit.
The mission praised Ukraine's strong fiscal performance, moderate inflation and "vibrant industrial growth," but said it could not recommend the IMF approve new loans to the government until it eliminated tax distortions and strengthened structural reforms.
The IMF also urged parliament to adopt the government's budget bill for 2004 to buttress the economy's "favorable trends."
Ukraine's economy grew 4.1 percent last year and about 4 percent growth is expected in 2003.
IMF officials also praised Ukrainian officials for their caution in proceeding with plans announced in August to repay $1.8 billion to the IMF six years ahead of schedule to cut interest payments and reduce debts.
Ukraine wants the IMF to approve a $725 million standby loan before the end of the year to support revenue shortfalls and encourage foreign investment after a two-year suspension.
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