Ukraine cabinet drafts 2022 budget with 3.5% of GDP deficit

Ukraine’s Cabinet of Ministers approved the 2022 draft
budget on Sept. 15 and submitted it to parliament. General budget revenues are
planned to increase 14.5% yoy to UAH 1,267 bln, while budget outlays are set to
increase 7.2% yoy to 1,442 bln. The budget deficit is targeted at 3.5% of GDP,
or UAH 188 bln. The draft assumes real GDP growth at 3.8% yoy, consumer
inflation at 7.2% yoy and the expected year-end exchange rate of UAH 28.60/USD.

The government aims to reduce the state debt to 57.6%
of GDP in 2022, from 64.7% initially planned for 2021. Gross receipts from
foreign borrowing are expected at UAH 125.6 bln and from domestic borrowing UAH
420.0 bln. The redemption of state foreign and domestic debt in 2022 are
estimated at UAH 72.4 bln and UAH 321.0 bln, respectively. Privatization
receipts are set at UAH 8 bln. The servicing of state foreign and domestic debt
will require UAH 60.6 bln and UAH 120.8 bln, respectively.

Evgeniya Akhtyrko: The decline
of the state budget deficit from a planned 5.5% of GDP in 2021 is a good
development. Earlier this year Finance Minister Serhiy Marchenko noticed that
the state deficit at 3.5% of GDP is what the IMF wants to see for 2022.
Therefore, it looks like that at the very start of the budget procedure the
government wants to make the budget parameters to be in line with IMF guidance.

We expect the presented draft budget will undergo
only minor changes during the parliamentary readings. The timely adoption of
the realistic budget will increase Ukraine’s chances to receive IMF financing
under the current Stand-by program by the end of the year.