Ukraine general budget revenue falls 6% yoy in July

Ukraine’s general budget revenue fell 6.3% yoy in July after a 21.5% yoy jump in the prior month, according to NBU data released on Aug 29. July revenue was UAH 49.6 bln compared to UAH 52.9 bln a year ago and UAH 59.4 bln in June. For 7M16, general budget revenue grew 10.7% yoy.

Spending increased 20.3% yoy to UAH 60.2 bln in July compared to 19.9% yoy growth in June. Therefore, the plunge in revenue caused the general budget deficit to expand to UAH 22.9 bln in 7M16 after a UAH 11.3 bln deficit in 1H16. The central budget remains the main source for the gap, with a UAH 49.9 bln deficit for 7M16 (UAH 35.1 bln deficit for 1H16). Meanwhile, local budgets keep boosting their surplus (UAH 27.1 bln surplus for 7M16 compared to UAH 23.8 bln surplus for 1H16).

The main reasons for the sudden revenue drop was the absence of a NBU dividend wire this year (compared to UAH 7.0 bln in July 2015) and revived VAT reimbursement in July (UAH 12.1 bln vs. UAH 0.1 bln a month ago and UAH 6.8 bln in July 2015). At the same time, core revenue items such as personal income tax (+39.7% yoy in July) keep growing fast. 

Alexander Paraschiy: The July fiscal data was distorted by two factors: a high comparative base after a large NBU wire last year, and (b) a surge in VAT reimbursement after VAT repayment was temporarily frozen in June. Against this backdrop, the July revenue decline hardly tells us anything about the real tendencies of tax collections. Excluding VAT and the NBU dividends, fiscal collections would have risen 13.7% yoy in July, which means that budget revenues still are in good shape. What’s more, UAH 38 bln in NBU dividends are still expected to be wired to the budget by the year end. We are keeping our positive view on budget collections in 2016, anticipating general budget revenue increasing more than 10% yoy this year.