Ukraine VAT bonds not part of IMF program, deputy finance minister says

The USD 17.5 bln IMF loan program does not include a VAT bond issue, said Deputy Finance Minister Artem Shevelyov, as reported by the Ukrainian News agency on Sept. 25. “The idea about a VAT bonds issue came from the management of the State Fiscal Service,” he said. “It’s their opinion. We do not have VAT bonds in the IMF program.”

Last week, State Fiscal Service Head Roman Nasirov reported on the possibility of a UAH 20 bln VAT bonds issue. Total VAT arrears are about UAH 24 bln, he said.

Alexander Paraschiy: With this statement, the Finance Ministry was apparently reacting to Nasirov’s claims about a potential VAT bonds issue. In essence, this statement does not necessarily mean that VAT bonds are not on agenda. Indeed, the instrument has not been included in the IMF’s 2015 memorandum and no bonds are possible without the program being revised.

Still, in light of the improved economic situation and encouraging feedback from IMF officials about Ukraine’s progress, we cannot rule out a positive IMF response to the potential proposal of a new VAT bonds issue. It won’t happen this year, however, considering the usually time-consuming negotiations with the IMF mission.