Ukraine 2019 state budget approved with 2.3% of GDP deficit

Ukraine’s parliament approved the 2019 state budget in
the early morning of Nov. 23 with revenues and spending each rising by UAH 18
bln from the first reading to UAH 1,019 bln and UAH 1,112 bln, respectively.
The deficit stayed unchanged, amounting to UAH 90 bln (2.3% of GDP).

Among other changes, MPs reduced government subsidies
for agricultural producers by UAH 1 bln, channeling this amount to outlays for
regional development. The budget committee supported prolonging a fiscal
experiment on financing the repair of roads from customs receipts.

The budget plan is based on the assumptions of 3.0%
real GDP growth and inflation of 7.4%.

Evgeniya Akhtyrko: Despite some revisions, this budget
is very close to what was approved in the first reading. The redistribution of
funds from agricultural subsidies to regional development is an attempt to
strengthen the position of regional power brokers in the year of presidential
and parliament elections.

We expect this budget’s financial parameters will
satisfy the IMF in securing its proposed stand-by loan program with Ukraine for
USD 3.9 bln. We expect the new IMF-Ukraine agreement to be signed in the next
two-three weeks.