Ukraine budget revenue growth slows to 19% yoy in October

Ukraine’s general budget revenue growth slowed to
19.2% yoy from 23.4% yoy in September, the State Treasury reported on Nov. 27.
The main growth drivers were value-added tax (41% yoy growth), excise duties
(38% yoy) and personal income tax (35% yoy). Dividends from the NBU dropped 50%
yoy to UAH 5 bln. Rent on mineral extraction also fell by 38% yoy. For 10M17,
general budget revenue grew 38.5% yoy.

Spending in October sped up to 44.6% yoy growth and
created a UAH 10.4 bln general budget deficit. The central budget was the main
source for the fiscal gap (UAH 13.6 bln deficit) while local budgets were in
surplus (UAH 3.2 bln). For 10M17, the general budget was still in the black
(UAH 31.2 bln surplus) with a UAH 29.8 bln surplus at the local level and only
a UAH 1.4 bln surplus at the central budget.

Alexander Paraschiy: 
Budget revenues remain in good shape with only two months left in the year. In
the remaining time, collections will ease due to a high comparative base (last
year, the NBU transferred the main bulk of its dividends onto the last two
months of the year). However, the core taxes generate strong revenues and we
still expect budget collections to meet the Finance Ministry’s 27.5% yoy
revenue growth target for 2017.  Revenues are not a problem, but spending
is now an issue. Average monthly outlays for 10M17 were UAH 79.3 bln per
month. 

The largest monthly
spending was in September at UAH 101.3 bln. Yet the 2017 spending plan calls
for UAH 306 bln to be disbursed just in two months (November-December) with the
major part of that sum allocated for December. This schedule poses substantial
hryvnia depreciation and inflation risks. Therefore, it’s very likely the
government will decide to reduce its fiscal spending much less than planned,
meaning that the budget deficit will be below 3% of GDP in 2017. The unspent
costs will be transferred to next year’s budget.