"Social Security Contributions (SSC) in Ukraine need urgent attention," the report stated. "If nothing is done, the budget is poised to lose 4.5 percent of GDP in revenues in 2016 due to a legally mandated SSC rate reduction adopted in March 2015."
The IMF argued that Ukraine has no fiscal space to omit tax revenues.
"The possibility of financing social security entirely from the budget should only be considered in the context of a simultaneous and comprehensive review of the benefits that the system should deliver," the report stated.
The Fund said it endorses lowering SSC rates, but underscored that it should be done more moderately than currently suggested.
In December, the Ukrainian parliament, Verkhovna Rada, adopted the state budget for 2016 with a deficit of 3.7 percent of GDP.
