The Government of Ukraine has published a new memorandum with the International Monetary Fund (IMF), which defines the key obligations of the Ukrainian authorities to receive the next tranche of financing. This memorandum covers a wide range of issues, including financial stability and economic reforms, which are critical in the face of ongoing war and economic challenges.
A new memorandum on the interaction between the government of Ukraine and the IMF was published, which spells out the obligations that the Ukrainian government assumes after receiving the next tranche. The memorandum is large-scale and covers various areas. We selected the key points:
1. The Ukrainian authorities consider the increase in the VAT rate as an "effective potential source of additional revenues" for the state budget. The new possible rate of value added tax is not named, but it is known that the IMF previously recommended an increase in the rate from 20% to 22%.
2. The government of Ukraine has promised to make Ukraine's tax system "fairer" and "to introduce a more progressive personal income tax", which currently stands at 18%. And also carry out what the document calls a "comprehensive reform of the system of simplified taxation" so that businesses cannot avoid paying taxes and minimize them. Among them, we are talking about global tax reform, which should take place with the disclosure to tax authorities at their request of bank secrecy (ie, information about the movement of funds in customer accounts).
3. In 2025, the National Bank promised to conduct an annual assessment of banks' stability - stress testing - with the involvement of auditors.
4. Two state banks - Sens Bank and Ukrgazbank - will prepare for sale, and for this purpose they have already submitted a corresponding bill to the Verkhovna Rada. An international financial advisor should be appointed by the end of December 2024.
5. In order to fulfill the directive of the European Union, the authorities undertook to raise the requirement for the minimum authorized capital for banks from the current 200 million hryvnias (4.4 million euros) to 5 million euros by the end of January 2025. Owners of financial institutions will be given 6 months to complete it.
6. Electricity and gas tariffs may be raised for Ukrainians. The document states that the authorities allow "gradual increases in gas and electricity tariffs to the level of cost recovery while allocating sufficient and targeted resources to protect vulnerable households." Exact price guidelines are not specified.
7. The government undertook to promote reforms in the energy sector, in particular, the formation of the full composition of the supervisory board of "Ukrenergo" (7 members), the majority of which will be "independent" (that is, recommended by Western partners) members (the formation of the supervisory board is scheduled for the end of December 2024).
8. By the end of 2024, the National Bank and the National Commission for Securities and the Stock Market should prepare and introduce a revised version of the draft law on virtual assets, which should legalize cryptocurrencies in Ukraine, which are still banned, and for devices for which Ukrainians are blocked and forcibly bank accounts are closed.
9. Banks and non-bank institutions will be required to strengthen financial monitoring for clients. This means that people will be asked even more questions about their transactions and the origin of funds, and more documents will be required
10. The National Bank and the Individual Deposit Guarantee Fund should also develop a system for guaranteeing deposits in credit unions and life insurance companies. It is not available at the moment. The state guarantees the population only bank deposits - for the period of martial law (+3 months after) for 100% of the funds in the account.
