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Ukraine PM: Country Risks Losing Foreign Support Over Reform Delay

FILE - Ukrainian Prime Minister Arseniy Yatseniuk speaks to the media during a press conference in Kyiv, Ukraine, Nov. 20, 2014.

Ukraine risks losing the support of its Western backers if squabbles between the government and parliament delay or derail its reform efforts, Prime Minister Arseniy Yatseniuk said on Wednesday.

Ukraine has promised to revamp its tax system under an International Monetary Fund-led bailout program. But a failure to agree the size of tax cuts has delayed the submission of a draft budget for 2016 and therefore held up the disbursement of the next $1.7 billion tranche of IMF loans.

"We now have many allies in the West and these allies will stand with us so long as we show political will, responsibility and the unchanging nature of our goals and values as we carry out reform," Yatseniuk said in government meeting.

"The president, the government, parliament - we must all speak in one language," he said.

The delays are threatening just as Ukraine's economy shows sign of reviving. Analysts polled by Reuters expect inflation will fall to 12.3 percent in 2016, about a quarter what it is expected to reach in 2015.

Gross domestic product should grow 1.9 percent in 2016, after shrinking by 11 percent in 2015.

On Monday, lawmakers said parliament and the Finance Ministry were close to deadlock over planned tax cuts. Discussions between the government and parliament on tax have not started yet. Commentators said they were reluctant to make potentially unpopular budget decisions before October 25 local elections.

"The elections are over... We must fulfil all the criteria and indicators set out in our reform program which amount to the commitments Ukraine has made to our international partners," Yatseniuk said.

The lack of a complete draft budget is holding up not only the disbursement of the IMF cash, but also $2.3 billion from the United States and European Union for this year.

The tax row centers on the proposed level of taxation for the 2016 budget: lawmakers want steep cuts that the Finance Ministry says are not sustainable.