The Ukrainian government has not fulfilled a key structural benchmark required for the Seventh Review of the four-year, $15.5 billion Extended Fund Facility (EFF) Arrangement with the International Monetary Fund (IMF).
The RRR4U consortium, which prepares documents and advocates for the economic recovery of Ukraine, wrote in a press release.
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Ukraine delayed adopting a law that increased excise taxes on tobacco products by several months. As a result, the state budget did not receive about Hr.2 billion ($48.7 million), the RRR4U reported.
The delay is partly caused by the fact that Ukraine’s president Volodymyr Zelensky did not sign the bill for two months, although Ukraine’s parliament had voted for it before. Zelensky did not explain the reasons for the delay publicly.
The deadline for fulfilling the requirement to completely repeal “Lozovy’s amendments” – changes to the Criminal Procedure Code of Ukraine that came into force in 2018 – was postponed. The changes mostly concerned the terms of pre-trial investigation deadlines and the Law of Ukraine “On Forensic Examination.”
The amendments are called by the name of Ukrainian lawmaker Andriy Lozovy, who was an acting lawmaker in 2017.
They enabled a halt to the criminal investigation if the timeframe of pre-trial investigation turned out to be too long. Court lawyers and anti-corruption activists said that they helped Ukraine because the country’s law enforcement would be motivated to finish the pre-trial investigations fast and not abuse entrepreneurs by dragging out pre-trial investigations against businesses.
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In 2020, “Lozovy’s amendments” helped shut down a corruption case against the Deputy Head of the Office of the President of Ukraine, Oleh Tatarov.
“The fact that Ukraine managed to reach an agreement on the Review at the staff level [without canceling the ‘Lozovy’s amendments’] means that once again the IMF is showing some flexibility towards us,” Maksym Samoiliuk, an economist at Ukrainian Center for Economic Strategy, said.
In the previous memorandum, the IMF criticized Ukraine for failing to meet its requirements on time.
“Program performance has been strong, despite some slippages in the governance sphere,” the IMF staff wrote in the recent IMF memorandum.
The next, eighth review of the EFF program, when the IMF will check compliance with the benchmarks as of the end of March, may also be problematic for Ukraine, as it has fulfilled only two out of the five requirements on time, the RRR4U reported.
Ukraine still needs to appoint the head of the Economic Security Bureau (the competition is ongoing), approve an external audit of the National Anti-Corruption Bureau of Ukraine, and prepare a strategy for the National Securities and Stock Market Commission.
“Progress cannot be considered satisfactory. We will either have to meet the benchmarks late – there is time until June – or negotiate with the IMF to modify or postpone their deadlines,” Samoiliuk said.
What benchmarks Ukraine did not fulfill under the EU Ukraine Facility program?
Ukraine is already facing problems with meeting nine benchmarks under the EU’s financial assistance program Ukraine Facility for the first quarter of 2025, Aliona Korohod, an expert at an analytical center DiXi Group projects, said.
By the end of March, Ukraine was supposed to fulfill 16 indicators. As of March 27, only seven had been completed, the RRR4U reported.
“We may repeat last year’s situation when there was a delay in implementation,” Korohod said. “This led to a delay in reporting and, accordingly, a delay in disbursing funds, which this time could be postponed until June.”
The European Council approved €3.5 billion ($3.8 billion) in grants and loans for Ukraine’s macro-financial stability, reconstruction, and modernization, Kyiv Post previously reported.
Ukraine is counting on €12.5 billion ($13.5 billion) from the EU in 2025.
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