Ukraine general budget revenue falls 4.2% yoy in April

Ukraine’s general budget revenue fell 4.2% yoy in April compared to 9.6% yoy growth in the prior month, according to a May 25 Treasury report. In 4M16, general budget revenue increased 10.4% yoy.

In April, general budget collections reached UAH 55.7 bln, down from UAH 58.1 bln a year ago. Spending increased 20.8% yoy to UAH 63.7 bln in April, slowing from 54.7% yoy growth in March.

Due to falling collections, the general budget slid into red at a UAH 5.1 bln deficit in 4M16 (and a UAH 8.9 bln deficit in April). The main factor was the worsening central budget, which reached a UAH 22.2 bln deficit for 4M16 (or UAH 11.6 bln deficit in April). At the same time, local budgets kept accumulating funds and boosted their surplus to UAH 17.1 bln by the end of April (or UAH 2.7 bln surplus throughout the month).

The main reason for falling state collections in April was the absence of additional import duties this year, as well as no wires from the NBU. Net of the temporary revenue shortfall effect, state collections would have increased 28.3% yoy during the month. At the same time, rent on mineral extraction swelled 81.3% yoy, excise duties grew 40.2% yoy, personal income tax added 40.0% yoy and VAT collections rose 26.9% yoy. Enterprise profit tax revenue plunged 48.7% yoy.

Alexander Paraschiy: Last April, we pointed out that the Finance Ministry was benefitting from a one-off revenue windfall, consisting of UAH 9.7 bln from the NBU, a UAH 2.7 bln payment for a 3-G license and UAH 2.3 bln in additional import duties (UAH 14.7 bln in total). Those revenue sources are absent this year, becoming the only reason for the decline in general revenues. Meantime, core budget revenue items maintained substantial growth.

No doubt, lower budget collections look disappointing, even if it’s because of the high comparative base. However, we need to keep in mind that UAH 38 bln is budgeted for 2016 as “NBU profit” and MinFin has yet to tap those funds. When the NBU starts transferring those funds, budget statistics will improve. Current trends on core budget revenue, coupled with budgeted “NBU profit,” should be enough to meet the 9.7% yoy general budget revenue growth targeted in 2016. Against this backdrop, so far we do not see a risk of violating the 3.7% of GDP general budget deficit limit that Ukraine committed to the IMF.