December 21, 2016 / 3:28 AM / 7 months ago

Ukrainian MPs pass 2017 budget to boost IMF aid hopes

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Ukrainian lawmakers attend a parliament session in Kiev, Ukraine, December 20, 2016.Valentyn Ogirenko

KIEV (Reuters) - Ukraine's parliament approved a budget for 2017 on Wednesday, raising its chance of securing more aid from the International Monetary Fund under a $17.5 billion loan package.

The approved document keeps the budget deficit at 3 percent of gross domestic product in line with the IMF program's requirements.

MPs had intended to pass the budget weeks ago and delays in approving it have already held up the potential disbursement of a further $1.3 billion from the Fund this year, causing foreign exchange reserves to fall below the central bank's target.

The IMF and other international backers have propped up Ukraine's economy since the country plunged into turmoil in 2014 following the Maidan street protests and the outbreak of separatist violence in eastern Ukraine.

Ahead of the parliament vote in the small hours of Wednesday morning, Finance Minister Oleksandr Danylyuk called it a "realistic" budget, adding: "please support it and give impetus to reforms."

Ukraine's record of passing reforms since a Western-backed leadership took over in 2014 has been patchy, which has slowed the disbursement of new aid.

Ukrainian Prime Minister Volodymyr Groysman addresses lawmakers during a parliament session in Kiev, Ukraine, December 20, 2016.Valentyn Ogirenko

On Monday, the government declared the country's largest lender insolvent and took it under state control, part of an IMF-backed crackdown on lenders with shaky balance sheets.

But parliament has failed to pass other measures suggested by the IMF, including pension reforms and ending a moratorium on the sale of private land.

Slideshow (3 Images)

In October the government unexpectedly decided to double the minimum wage to 3200 hryvnias ($122) per month, slotting the hike into the budget bill in between the first and second readings.

Budget revenue is seen up 2.1 percent to 721.4 billion hryvnias and expenditures up 1.9 percent to 790.4 billion hryvnias compared to the initial draft budget.

The draft was based on a forecast of GDP growth of 3 percent next year compared with an expected increase of 1 percent in 2016, while inflation is expected to slow to 8.1 percent from 12 percent.

The IMF said in November that Ukraine needed to pass a suitable budget and step up efforts to fight corruption -- including by jailing crooked officials -- in order to secure more loans.

Additional reporting by Alexei Kalmykov; Editing by Matthias Williams and Michael Perry

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