IMF expresses disapproval with Cabinet decisions reducing MinFin authority

The IMF has sent a letter to Ukraine’s Cabinet of Ministers
expressing its dissatisfaction with its decisions made at a closed meeting last
week that restrict the Finance Ministry’s authority and remove its control of
the State Fiscal Service, the liga.net news agency reported on June 1, citing
its anonymous sources. The letter warned that the decisions could undermine the
next IMF loan tranche, the epravda.com.ua news site reported.

One of the resolutions, yet to be published, removes
MinFin from the list of state bodies required to approve the government’s
financial documents. The other Cabinet resolution, removing control of the State Fiscal Service from the Finance
Ministry, was approved in violation of government procedures
and is illegal, Ukraine’s Finance Minister Oleksandr Danyliuk told a meeting
with Ukrainian business leaders on May 31.

The Cabinet’s decision to concentrate “so much power
in one set of hands, especially before elections, is not right,” he said,
adding that  he believes that this decision will not be published and
become official.  This conflict should serve to boost efforts to reform
the State Fiscal Service, implying that the Cabinet’s attempt to take control
of the state’s leading tax authority is aimed at undermining reform.

Evgeniya Akhtyrko: We believe this conflict will be smoothened out, as already
demonstrated by the Cabinet’s response in denying ever approving such
resolutions. (Danyliuk said MinFin received copies of the resolutions,
epravda.com.ua reported). We agree with Danyliuk on the negative risks the
Cabinet’s decision creates, which we identify as an enlarged budget deficit
amid less-controllable public spending, higher inflationary pressure with
consequent monetary policy hardening, as well as halted reforms of the fiscal
service.