Ukraine raises central budget deficit target to 5.8% of GDP in 2014

Ukraine raises central budget deficit target to 5.8% of GDP in 2014



1 грудня 2014 года
Конкорд Капитал

Ukraine’s state central state budget deficit reached UAH 53.8 bln in 10M14, the Finance Ministry (MinFin) reported on Nov 28. The value includes UAH 6.8 bln in VAT reimbursement arrears, which have been covered with VAT bonds (not monetary payments). The deficit net of VAT bonds was UAH 44.4 bln (2.9% of GDP), compared to the UAH 39.7 bln deficit reported for the same period in 2013.



Also MinFin reported that its 2014 deficit target for the central budget (which is a part of the general state budget) is UAH 88.4 bln (5.8% of GDP), which is a substantial increase compared to UAH 63.8 bln (net of loans) targeted previously. MinFin mentioned that the new target includes UAH 11.1 bln in extra spending for local budgets to compensate below-cost heating rates and a VAT bonds issue (up to UAH 16.7 bln planned for 2014). In its September memorandum, the IMF set a requirement for a 5.8% of GDP deficit for the general budget (excluding Naftogaz).



Alexander Paraschiy: As we expected, MinFin sped up with public outlays closer to the end of the year in what translated into a faster central deficit increase (UAH 13.2 bln in October vs. UAH 4.3 bln in September). And for the moment, the key question is whether the authorities will meet the general deficit limit committed to the IMF (5.8% of GDP for general budget) or whether the fiscal gap will be higher due to a substantial revenue shortfall (we expect at least a UAH 20 bln, or 1.3% of GDP, shortfall this year).



Against this backdrop, the raised central budget deficit target (up to UAH 88.4 bln in 2014) could harm efforts to gain the next IMF tranche. A narrowed 2015 budget deficit might be more important for the IMF than extra hryvnia printing to finance the extra fiscal deficit in 2014.

Источник: Конкорд Капитал

Аналитик: Александр Паращий
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