Ukraine budget revenue declines 2.9% yoy in November

Ukraine’s state budget collections declined 2.9% yoy in November (vs. +3.1% yoy in October), according to a State Treasury report on Dec. 1. In 11M14, budget revenue reached UAH 325.6 bln, which is 5.4% more yoy. The Treasury reimbursed to exporters UAH 3.3 bln of VAT in cash in November, which is 41.6% less than a year ago (UAH 42.1 bln for 11M14, which is -17.9% yoy). Only UAH 0.1 bln in VAT bonds were placed in November. The Treasury claimed a UAH 26.7 bln central budget revenue shortfall (or 6.8% underperformance) for 11M14.

Alexander Paraschiy: The poor state collections indicate the importance of a realistic (i.e. radically decreased) spending plan for 2015, which will be vital for the IMF to make a decision on further cooperation with Ukraine, and thus for Ukraine to service its external debts. A substantial central budget revenue shortfall (by more than UAH 20 bln) looks inevitable in 2014. The August tax increase did not help and now the big question is what the authorities will do with the extra fiscal gap.

Most likely, the central bank (NBU) will have to provide budget financing in the amount of about UAH 20 bln in December. In essence, the IMF is strongly against additional hryvnia printing for budget deficit financing. Yet the government’s commitment to IMF demands did not prevent the NBU from increasing its portfolio of state securities by UAH 137 bln since the year start.