Ukraine budget deficit narrows to UAH 4 bln in July

Ukraine’s general budget deficit narrowed to UAH 3.8
bln in July from UAH 9.8 bln in the prior month, the State Treasury reported on
Aug. 26. General budget revenue surged 26.4% yoy to UAH 118.4 bln after sliding
6.4% yoy in June. General budget expenditures inched up 1.0% yoy to UAH 121.8
bln, slowing from 24.5% yoy growth in June.

In 7M21, the general budget deficit amounted to UAH
18.4 bln (vs. a deficit of UAH 32.1 bln in 7M20).

Tax revenue jumped 27.5% yoy to UAH 108.9 bln in July,
slowing from 37.9% yoy growth in June. Net VAT revenue increased 29.1% yoy (vs.
a 26.3% yoy increase in June), as gross VAT revenue increased 25.8% yoy and VAT
reimbursement increased 22.1% yoy. The revenue from personal income tax
increased 21.0% yoy (vs. 29.1% yoy growth in June). In addition, enterprise
profit tax and royalty payments on the use of natural resources jumped more
than two-fold year-on-year.

Non-tax revenue increased 20.2% yoy to UAH 9.1 bln in
July (after declining 50.2% yoy in June). In particular, the revenue of
budget-financed entities increased 40.8% yoy; administrative payments advanced
19.7% yoy. Meanwhile, revenue from ownership and entrepreneurship dropped 56.5%
yoy.

Evgeniya Akhtyrko: The very
weak growth of budget expenditures in July resulted in quite a moderate budget
deficit. The growth of budget revenue stays strong due to the steady growth in
the collection of major taxes. Meanwhile, the growth of non-tax revenue is
mostly maintained by the revenue from administrative payments and
budget-financed entities, while the revenue from ownership and entrepreneurship
continues to decline, indicating a poor recovery of small and medium businesses
from the crisis.

We expect the budget expenditures to surge in
upcoming months. The government is likely to use the rest of the warm season
for fostering budget-financed infrastructure projects.