Ukraine 2015 draft budget leaked to mass media

Ukraine’s mass media began on Dec. 15 reporting the details of the 2015 draft budget leaked on Dec 14-15. The spending plan projects a central budget deficit of UAH 65.1 bln, or 3.8% of planned GDP (4.5% of GDP in 2014), budget revenue near 25.4% of planned GDP (22.9% of GDP in 2014), and significantly hiked privatization collections (UAH 17 bln vs. UAH 0.5 bln for 11M14). Among the biggest spending hikes are for the Interior Ministry, reaching UAH 22.6 bln compared to UAH 17.9 bln this year. Among the biggest spending cuts are coal subsidies being halved to UAH 4.6 bln compared to UAH 11 bln in 2014.



As for the mammoth-sized Pension Fund, the budget projects its deficit (which is covered directly from the state budget) will increase to UAH 98.1 bln (5.8% of GDP) in 2015 from UAH 81.7 bln (5.3% of GDP) in 2014. The document does not suggest any substantial increase in military spending, raising the Defense Ministry’s budget to UAH 16 bln compared to UAH 15.2 bln in 2014, while decreasing its reserve fund (which includes costs for the military campaign) to UAH 17.8 bln from UAH 20 bln in 2014.



Alexander Paraschiy: Though the suggested central budget deficit might be close to what the IMF is eager to see, an utterly unrealistic revenue target makes it impossible to achieve, in our view. The draft foresees a near 20% yoy increase in state collections, which is unjustifiable considering the Cabinet is projecting nominal GPD to grow only 10%-11% yoy (and real GDP to fall 4.5%) in 2015. It is also exceedingly optimistic to anticipate UAH 17 bln in privatization revenue in the face of overwhelming uncertainty in the country.



To make matters worse, it is not clear what is intended with the hiked Pension Fund deficit after pensions have been frozen in the densely populated occupied territory and minimal pensions have been adjusted only modestly in the draft. All in all, the document circulated in the media does not look like a conservative spending plan that promises successful talks with the IMF, which will be all the more stringent in requiring realistic spending projections.

Источник: Конкорд Капитал