IMF says planned laws threaten Ukraine's finances
WASHINGTON (Reuters) - The IMF warned Ukraine on Sunday not to backtrack on reform plans, saying legislation proposed for consideration in the coming week would, if adopted, "significantly" hurt efforts to shore up Kiev's finances.
The International Monetary Fund's Poul Thomsen also said that another proposed bill, on converting foreign exchange loans to hryvnia, would hurt Ukraine's banks and therefore depositors and borrowers too.
Ukrainian President Petro Poroshenko told local television late on Sunday he believed parliament would correct "its mistake" over the foreign exchange loan bill, suggesting he would veto the bill if parliament did not repeal it.
"I will defend Ukraine," Poroshenko said when asked if he would veto the bill.
The IMF's Thomsen said in a statement: "Reversing economic reforms for the sake of short-term gains has been detrimental to Ukraine's economy in the past."
"Ukraine needs to stay the course on reforms," he said.
Thomsen, the IMF's European Department Director, pointed specifically to a package of seven bills he said "would roll back important policies that were put in place in the context of the IMF-supported programme in the areas of pension reform, energy sector reform and expenditure rationalisation."
Ukraine has so far received $5 billion (3 billion pounds) from the Fund, which has pledged a total of $17.5 billion if economic and fiscal reforms are made. The IMF package is part of a broader $40 billion bailout.
Ukraine's deputy finance minister, Artem Shevalev, said on Thursday that Kiev hoped to receive a second tranche of loans in August.
The statement from Thomsen suggests those hopes could be dashed if Ukraine's parliament approves the legislation.
Thomsen said the fiscal impact of the bills could reach nearly 2 percent of gross domestic product (GDP) over the remainder of this year and 3.5 percent of GDP in 2016.
(Reporting by Timothy Ahmann, additional reporting by Natalia Zinets in Kiev,; Editing by Ruth Pitchford and Gareth Jones)
