Ukraine general budget surplus shrinks to 1.4% of GDP in October

Ukraine general budget revenue grew 45.9% yoy in October compared to 49.1% yoy in the prior month, the State Treasury reported on Nov. 26. Spending slowed somewhat to 18.9% yoy compared to 22.1% yoy in September. At the same time, the general budget balance switched into red at a UAH 5.7 bln deficit in October. The monthly deficit was solely on the side of the central budget (UAH 6.0 bln deficit) while local budgets kept on stocking up money with a UAH 0.3 bln surplus in October.

Central bank support (UAH +5.0 bln), a 3.3x increase in import duties (UAH +2.9 bln) and a 30.1% yoy growth in personal income tax collections (UAH +2.1 bln) were the main sources of budget revenue growth in October. Those three items accounted for 59% of the general budget revenue increase throughout the month.

Disregarding the October deficit, the general budget balance still remains at a hefty surplus (UAH 26.8 bln) in 10M15, made up mostly of the local budget surplus (UAH 24.0 bln). In 10M15, general budget revenue increased 40.9% yoy while spending still lagged behind at +19.0% yoy.

Alexander Paraschiy: The Treasury has reported an ongoing solid surplus (UAH 26.8 bln, or 1.4% of GDP) in 10M15, which means that fiscal accounts are on the safe side. The main outlays will likely occur in November-December but it’s clear than by the end of 2015, the budget deficit will not exceed 4.2% of GDP committed to the IMF.

At the same time, the 2016 budget prospects are under question. The Finance Ministry has already agreed on a spending plan with the IMF (which assumes a decrease of budget deficit to 3.7% of GDP). However, it will face criticism when submitted to parliament. Many MPs and activists are insisting on more radical tax reform and they are threatening to oppose what they consider to be excessively modest tax adjustments that the 2016 budget is built on.

Moreover, the 2016 budget will face resistance even internally from the Cabinet since it presumes considerable spending cuts on education, healthcare and social assistance. We expect very charged debates over the new budget and we can hardly predict in what form and when it might be approved. This layout means that the next IMF tranche will arrive in early 2016, in the best case.

Источник: Конкорд Капитал