Ukraine faces 'catastrophe' if IMF-backed budget not passed

Ukrainian Prime Minister Arseniy Yatsenyuk has warned that the cash-strapped and war-scarred nation faced an "economic catastrophe" if parliament failed to pass an IMF-backed austerity budget in a Thursday vote.

Deputies are set to debate legislation that could unlock the release of a delayed 1.7 billion dollar (1.6 billion euro) loan from the International Monetary Fund and other Western aid.

But Ukraine's increasingly splintered parliament has already blocked the implementation of some 2016 budget amendments that could make the former Soviet state's finances more transparent and loosen the state's hold on its biggest industrial companies.

Yatsenyuk sounded a note of exasperation at a cabinet meeting Wednesday.

"The lack of responsibility by some parliamentary factions and deputies could lead to the non-payment of pensions and salaries," he said in televised remarks.

Parliament's failure to adopt the budget and major tax amendments could result in a lack of government funds "for Ukraine's army, police, schools, hospitals and lead to an effective economic catastrophe."

"I will not allow that," he added.

The IMF and the world's richest nations that form the G7 group and firmly back Kiev in its 20-month conflict with pro-Russian insurgents have said Ukraine would never achieve sustainable growth without a wider tax base that removes privileges for both individuals and firms.

Ambassadors representing the G7 countries also warned in a joint statement Tuesday that Ukraine will have to adopt a "fiscally sustainable budget" if it wanted more Western aid.

US Vice President Joe Biden in turn said during a visit to Kiev in early December that Ukraine has failed to deliver on its promise to fight the "cancer of corruption" that has eaten away that the country's economy for years.

Ukraine crept out of recession in the third quarter but is still on track to see a fall of about 10 percent gross domestic product for 2015.