December 7, 2017 / 9:50 PM / 10 days ago

Ukraine passes 2018 budget it says meets promises to IMF

KIEV (Reuters) - The Ukrainian parliament on Thursday approved at the final reading the 2018 draft budget, which includes an adjusted deficit forecast that the finance ministry said was in line with Ukraine’s fiscal commitments to the International Monetary Fund.

The IMF, which supports Ukraine with a $17.5 billion aid-for-reforms program, had talks with the authorities about next year’s draft budget in November, but has not yet said if it approves the government’s plans.

The bill was backed by 273 lawmakers, comfortably more than the 226 required to pass.

“The budget is balanced and realistic,” Finance Minister Oleksandr Danylyuk told lawmakers ahead of the vote.

“We are strengthening budget discipline, which allows a shrinking of the deficit to 2.5 percent (of gross domestic product) in 2018. The size of the deficit corresponds to the guidance of the general IMF program,” he said.

The budget foresees a lower deficit next year than in 2017. But the forecast of 81.85 billion hryvnias ($3.02 billion) is higher than the 77.95 billion hryvnia estimate in an earlier draft.

Nevertheless, the government has also increased its inflation and nominal GDP projections, which means the 2018 deficit equates to 2.46 percent of GDP - slightly higher than the IMF-backed deficit target of 2.4 percent.

The budget expects inflation of 9 percent, compared with an earlier forecast of 7 percent, and economic growth of 3 percent.

The draft also foresees increased revenue of 914 billion hryvnias, versus an earlier expectation of 877 billion, through the sale of a 4G network license, improved profitability for state-owned energy firm Naftogaz and the sale of confiscated property.

Ensuring the budget complies with agreed fiscal targets is one of the conditions Ukraine must meet to receive further funding from the IMF.

The government had hoped to receive the long-delayed next tranche of IMF loans worth $2 billion this year, but a lack of clarity on the sustainability of recent pension laws and backtracking on gas pricing commitments have further stalled the disbursement.

Earlier on Thursday IMF chief Christine Lagarde also expressed deep concern about recent action against anti-corruption institutions and called on the Ukrainian authorities to do more to safeguard them from attacks.

($1 = 27.1000 hryvnias)

Writing by Alessandra Prentice; editing by Matthias Williams

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