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6.1.2 Budget dynamics - specific issues...
The Rada recently passed one economic bill that met with IMF skepticism. Starting September 1st, Ukrainians who have accumulated assets, but failed to pay taxes on them, can declare them voluntarily, pay a one-time fee and avoid punishment for tax evasion. For this one-year amnesty, the fee schedule is: 2.5% for government bonds, 5% for assets in Ukraine and 9% for assets held abroad. Goesta Ljungman, the IMF’s outgoing resident representative in Ukraine, told Interfax-Ukraine before the vote: “Tax amnesties often hurt tax collection in the long run because they discourage people from paying their future taxes by making them think there will be yet another future amnesty.
6.1.3 Budget dynamics - funding
The EU and its European Investment Bank are investing €460mn to repair damaged infrastructure in Donetsk and Luhansk, reports Jean-Erik de Zagon, the bank’s resident representation in Ukraine. A first tranche of €120mn will be used to repair 168 buildings – largely schools, kindergartens, libraries, culture houses, medical clinics and apartment buildings for internally displaced people. Building on the success of this ‘Ukraine Early Recovery Program,’ the EU and Bank recently agreed to a second €340mn loan, largely targeting Donetsk and Luhansk.
The World Bank approved a $212mn in low interest loans to help Ukraine synchronize its electricity system with the EU’s ENTSO-E power grid by 2024 on June 1. The Bank reports that loans to Ukrhydroenergo will help pay for 197-megawatt short-duration battery energy storage systems combined with solar power plants at four hydroelectric dam sites on the Dnipro -- Kyiv, Kaniv, Kremenchuk and Kamianske. In addition, a long-duration battery and solar power plant will be installed at Dnister Hydroelectric Plant.
Ukraine has signed a $350mn loan agreement with the World Bank that aims to help mitigate the impact of the COVID-19 pandemic and support economic recovery, Prime Minister Shmygal said June 23. The money also will help implement a fair development of the farmland market, continue reform of the natural gas sector, and strengthen the credit market. Since Ukraine joined the World Bank in 1992, the Bank has committed $14bn for more than 80 projects and programs.
The US Department of Defense announced on June 11 that it will provide the Ukrainian military with a $150mn aid package “to preserve the country’s territorial integrity, secure its borders” and boost Ukraine’s cooperation with NATO. Within the package, the Ukrainian army will receive better training and equipment like counter-artillery radars, counter-unmanned aerial systems, secure communications gear, and electronic warfare and military medical evacuation equipment. Initially, the US promised to give Ukraine $250mn in military assistance as a part of the Ukraine Security Assistance Initiative (USAI) but in March the US Defense Department said that Ukraine would receive only $125mn because it hadn’t shown “sufficient progress on defense reforms.”
Ukraine’s State Road Agency Ukravtodor (UKRAVT), the state body that manages Ukrainian roads, priced a $700mn Eurobond on June 17. The
38 UKRAINE Country Report July 2021 www.intellinews.com