THE ECONOMIST is at a conference in Kiev, organised by the Kiev Post, a newspaper. Most delegates speak in glowing terms about how Ukraine’s economy, currently moribund, will in time be one of Europe’s most prosperous. (Jaded observers at the conference say they have heard it all before.) But few are talking about something much more pressing. Politicians are fighting over Ukraine’s proposed budget for next year; if things don’t go to plan, 2016 could look very tricky.
There are two competing proposals for the budget. One, which is being pushed by the Ministry of Finance, is a fairly sensible plan. It will eliminate a range of tax loopholes and would also cut some spending. With that budget, Ukraine would probably run a budget deficit of about 4% of GDP next year. The IMF, which has arranged a bail-out with Ukraine, is happy with it.
But the IMF is not so happy with the competing proposal, which has come from a member of the party of Petro Poroshenko, the president. This plan envisages hefty tax cuts, but also keeps plenty of loopholes. For that reason it is politically far more palatable. But that...Continue reading
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