Ukraine's Parliament Approves Austerity Laws Needed For Draft Budget

KIEV (Reuters) - Ukraine's parliament backed on Sunday the final reading of laws that will simplify tax legislation and impose additional duties on imports, improving the chances a 2015 budget will be approved soon as required by the country's Western backers.

Voting was delayed as deputies debated the merits of the amendments, with some arguing they unfairly increase prices for Ukrainians, many of whom are already struggling to make ends meet as the economy teeters on the edge of bankruptcy.

The government says the more than $1 billion that the higher import duties will generate is essential for next year's draft budget, which is already forecast to show a deficit of 3.7 percent of GDP.

Parliament is under pressure to approve a budget as soon as possible in order to get the next tranche of financial aid under a $17 billion International Monetary Fund loan package.

Higher import duties will make it harder for foreign firms to sell their products in Ukraine, a fact acknowledged by Prime Minister Arseny Yatseniuk.

"Problems could arise with our trade partners," he told parliament, advising that the law should only come into effect once the government has consulted on it with international partners.

Parliament also backed an amendment on budget decentralization and were due to vote on a law abolishing certain social benefits, also required by the draft budget, which sets out a strict austerity plan for Ukraine.

Foreign currency reserves have more than halved since the start of the year to a 10-year low, due to gas debt repayments to Russia and efforts to support its struggling currency, the hryvnia.

Remaining reserves stand at just under $10 billion, barely sufficient to cover two months of imports.