Ukraine Cabinet proposes abolishing interim import duties in 2016

Ukraine’s Cabinet of Ministers adopted a draft law that abolishes additional import duties ranging between 5 and 10% as of Jan. 1, 2016, the Interfax-Ukraine news agency reported on Oct. 22, citing Economy Minister Aivaras Abromavicius. The Cabinet will submit its bill to parliament in the nearest future, he said. The import duties were imposed as of February 2015 to stabilize balance of payments. Previously, Abromavicius estimated that these additional duties reduced imports by USD 1 bln in 2015, the Interfax-Ukraine reported.

Alexander Paraschiy: The abolition of these additional import duties will have immediate consequences for the economy. Firstly, this will be among the key factors to speed up a recovery in imports, thus triggering a widening trade deficit with subsequent pressure on the national currency.

Also, it must be considered that these duties generated UAH 14.0 bln in budget collections in 8M15, which we estimate will reach UAH 24 bln by the year end. Abolishing the duties will lead to an irreversible loss of these collections in 2016, inevitably forcing the Finance Ministry either to search for alternative budget revenue sources or to cut budget spending.

Despite such unpleasant effects, the measure is necessary due to international commitmentsunder WTO rules.