Ukraine budget revenue drops 2% in 2M20

Ukraine’s state budget dropped 1.7% yoy to UAH 122.6
bln in 2M20, which is 12.3% below plan, the State Treasury provisionally
reported on March 3. Net tax revenue jumped 21.5% yoy to UAH 59.5 bln (5.4%
below plan) amid 8.0% yoy growth of gross tax revenue and a 12.1% yoy fall in
VAT reimbursement. Customs revenue plummeted 15.3% yoy to 40.7 bln (25.8% below
plan).

Local budgets’ fiscal revenue improved 13.3% yoy to
UAH 47.5 bln in 2Ì20, which is 4.6% below plan. Social payments (pension and
other social fund contributions paid by employers) advanced 13.5% yoy to UAH
45.4 bln.

In February alone,  state budget revenue
increased 2.1% yoy to UAH 71.7 bln, which is 4.7% below plan. Net tax revenue
jumped 27.6% yoy to UAH 37.1 bln (7.1% above plan) amid 13.7% yoy growth in
gross tax revenue and a 17.2% yoy fall in VAT reimbursement. Customs revenue
plummeted 19.7% yoy to UAH 22.6 bln (21.7% below plan).

Evgeniya Akhtyrko: A plunge in
VAT reimbursement to exporters helped to improve the situation with tax
revenues in February. Meanwhile, the situation with customs revenue remained as
poor as in January.

We don’t see any chances for significant improvement
in budget collections in the nearest months given the current slowdown of
economic growth. Given the expected changes in the Cabinet of Ministers, it’s
becoming more difficult to predict the government’s actions in addressing its
fiscal problems.

At the moment, we see the increased likelihood that the new government
will be more prone to employ so-called “manual management” methods for
improving budget collections, which involves a selective approach to tax
collections and VAT reimbursement instead
of a uniform one.