Ukraine budget drops into UAH 29 bln deficit in July

Ukraine’s general budget fell into a deficit of UAH 28.7
bln in July from a surplus of UAH 28.5 bln in June, the State Treasury reported
on Aug. 26.  Budget revenue declined 8.0% yoy to UAH 93.7 bln in July
after surging 50.5% yoy in June. General budget expenditures jumped 21.9% yoy
to UAH 120.5 bln after growing 7.0% yoy in the prior month.

In 7M20, the general budget deficit amounted to UAH
32.1 bln (vs. a surplus of UAH 22.7 bln in 7M19).

Tax revenue slid 0.8% yoy to UAH 85.4 bln in July,
after 1.0% yoy growth in June. In particular, personal income tax revenue
declined 4.2% yoy (vs. 0.5% yoy growth in June). Resource royalty payments
dropped 38.6% yoy (vs. a 60.6% yoy decline in June). Enterprise profit tax
proceeds slid 9.9% yoy (vs. a 73.3% yoy decline in June). Meanwhile, net VAT
revenue jumped 29.1% yoy (vs. a 85.5% yoy surge in June), as VAT reimbursement
declined 12.3% yoy and gross revenue advanced 5.8% yoy.

Non-tax revenue declined 50.9% yoy to UAH 7.6 bln in
July (after doubling yoy in June). In particular, income from ownership and
entrepreneurship plummeted 91.5% yoy. In addition, the revenue of
budget-financed entities slid 0.8% yoy. Administrative payments and revenue
from non-commercial activities declined 14.0% yoy. At the same time, “other”
non-tax revenue increased 17.2% yoy.

Evgeniya Akhtyrko: As we expected, the
government significantly intensified budget expenditures in July. Without
having non-regular revenue, like dividends paid by stated-owned entities in
June, the budget revenue declined amid a recessing economy.
And this resulted in an impressive surge of budget deficit.

We expect the government to exercise in full its
“right” to widen the budget deficit in 2020 as is provisioned by the budget amendments adopted in April.
The increased budget spending will be employed as a tool to maintain the popularity
of the Zelenskiy administration.