Cabinet of Ministers to begin review of 2012 state budget draft today

The Cabinet of Ministers is set to begin consideration of the 2012 state budget draft today, Ukrainian News reported yesterday, citing an agenda. The budget will be presented by Finance Minister Fedir Yaroshenko; the Finance Ministry has previously said it plans to keep the deficit next year at 2.5% of GDP, in line with requirements from the International Monetary Fund (vs. a planned deficit of 2.8% of GDP in 2011). Brad Wells: The budget process will be closely watched as a key IMF-demand (in addition to raising household gas tariffs) and is expected to hit parliament for debate and approval later this month. We see the 2.5% of GDP goal for the deficit as difficult, especially without reform at Naftogaz and expectations of increased social spending ahead of next October’s parliamentary elections. We see the fiscal deficit at 3.5-3.8% of GDP at end-2011E (see our report on the Ukrainian Economy from September 12, 2011 for more details).