Ukraine March general budget revenue growth slows to 9.6% yoy

Ukraine’s general budget revenue growth slowed to 9.6% yoy in March from 16.2% yoy in the prior month (+16.5% yoy in 1Q16), the state Treasury reported on April 27. General budget revenue reached UAH 71.8 bln from UAH 65.5 bln in the same year-ago month. Spending surged 54.7% yoy in March from 19.3% yoy in the prior month. 

The March growth in budget collections was fuelled by 4.2x yoy increase in rent from mineral extraction (UAH 4.1 bln), 42.4% yoy growth in personal income tax collections (UAH 3.2 bln) and 50.8% yoy rise in excise duties (UAH 2.4 bln). At the same time, import duties shrunk 52.8% (UAH 2.1 bln) due to abolished interim 5-10% import duties since January 2016. Also collections dropped 21.2% yoy (UAH 1.3 bln) from own revenues of state budget organizations.

As a result, the March general budget surplus shrunk to UAH 3.9 bln from UAH 9.9 bln in February. The central budget deficit widened to UAH 10.6 bln in 1Q16 (UAH 2.4 bln deficit for 2M16). At the same time, local budgets kept accumulating funds and their surplus swelled to UAH 14.4 bln from a UAH 12.3 bln surplus in the prior month.

Alexander Paraschiy: We expected declining rates of budget collections, with the main reasions being slowing inflation, as well as lower one-off collections (canceled additional import duties; no license sales such as 3G). Still, the three-month growth rates remain higher than the year-end target adopted by central and local budgets (+16.5% yoy for 1Q16, compared to +8.6% yoy outlined for the year).

And this robust 1Q16 result was achieved without any support from the NBU so far (UAH 38.0 bln of NBU profit is budgeted for the year). So the Finance Ministry still has reserves even if collections weaken further. Against this backdrop, we still consider as realistic the 3.7% of GDP budget deficit target that is required by the IMF.