Ukraine April budget revenue surges 37% yoy on NBU dividends

Ukraine’s general budget revenue surged 37.0% yoy in
April on the back of a UAH 47.6 bln dividends wire from the National Bank
(NBU). Net of the NBU money, general budget revenues increased only 5.0% yoy.
Excise duties (33.1% yoy higher), coupled with personal income tax (+25.5%
yoy), were the main source of budget revenues, apart from NBU support. At the
same time, VAT revenues dropped 11.5% yoy in April both due to VAT collections
decreasing (-4.9% yoy) and stronger VAT reimbursements (+18.9% yoy).

For 4M19, general budget revenues look somewhat
better: 18.0% higher yoy with the NBU dividends, and +9.1% yoy net. Apart from
the NBU wire, personal income tax (+23.4% yoy) and excise duties (+16.5% yoy)
underpinned the tax collections increase. VAT revenues declined 2.7% from the
previous year on the back of a 31.2% yoy reimbursement advance.

The one-shot dividend wire improved fiscal balance by
the end of April. The general budget was reported at a UAH 17.6 bln surplus
(near 0.5% of GDP) for 4M19. The central budget had a minor deficit (UAH 1.7
bln), while local budgets traditionally stashed away substantial funds (UAH
19.3 bln surplus for 4M19).

Evgeniya Akhtyrko: These
budget numbers look disturbing. The NBU has already wired to fiscal coffers
major part of NBU dividends envisaged for this year (UAH 64.9 bln total),
meaning that MinFin does not have much reserves. Meanwhile, the core sources of
budget revenues are weak. VAT used to be the backbone of general budget
collections, but now it’s in the red. The high level of VAT reimbursement can
be seen as potential leverage to correct budget collections (as it used to be).
However, a return to VAT reimbursement delays will be one more signal that
Ukraine’s public finances are in trouble.

The positive news is that the revenue target is
relatively modest and presumes only a 10.1% y/y increase through the year. With
inflation near 6% and real growth above 2%, potential underperformance looks
manageable.