Ukraine general budget reaches record surplus in 1Q15

Ukraine reported its 1Q15 general budget at a UAH 14.0 bln surplus, compared to a UAH 0.5 bln surplus in 1Q14. At the same time, the 1Q15 central budget (net of local budgets) surplus reached UAH 4.2 bln, compared to UAH 4.1 bln deficit in 1Q14. General budget revenue surged 25.0% yoy in 1Q15 on the back of a 55.4% yoy VAT increase, 58.5% yoy excise duty upsurge, 26.7% yoy growth in personal income tax collections and 2.6x jump in import tariff revenue. Also during the reported period, Ukraine received UAH 6.2 bln in a first wire from the sale of 3G licenses. At the same time, the central bank’s support for the budget in 1Q15 shrunk by a third to UAH 5.5 bln from UAH 15.8 bln a year ago.

General budget spending increased only 17.2% yoy in 1Q15 compared to 26.9% yoy general spending growth targeted for the whole year.

Alexander Paraschiy: The general budget surplus is positive, though it’s too early to celebrate. The main source of the budget collections upsurge was rapid hryvnia devaluation in February. We see it as a one-off effect that will fade out in line with falling consumption. Another point of concern is the modest spending activity of local budgets. Starting the year, local authorities received more own financial resources (like 5 percent of local excise duties) to boost their coffers. At the same time, the procedures for spending those funds have not been fine-tuned yet. As a result, local authorities are just sitting on money and are waiting for clear instructions on what to do with those funds.

In other words, for the moment we are observing a temporary effect of hryvnia decline, as well as the consequences of changes in fiscal rules in what stimulated spending delays. Against this backdrop, over the upcoming months we anticipate the fiscal balance switching into deficit again on the back of stronger spending activities, as well as slowing tax collections due to shrinking domestic consumption. By the end of the year, we still project the general fiscal deficit at 4.1% of GDP.

Источник: Конкорд Капитал