Ukraine’s Rada approves 2010 state budget

The Verkhovna Rada of Ukraine approved the 2010 state budget this morning, with the pro-presidential Party of Regions mustering 245 votes in favor. Mykyta Mykhaylychenko: Consolidated budget revenues were set at UAH 334.8 bln, while expenditures at UAH 397.8 bln. The deficit of UAH 57.7 bln (5.4% of GDP) is planned to be financed through ~UAH 28 bln in net external borrowings (incl. USD 2 bln from the IMF and USD 1.3 bln in Eurobonds), UAH 10 bln from privatization, with the balance (~UAH 20 bln) via domestic UAH debt. On top of that, the government plans to spend an additional UAH 30 bln to recapitalize state-owned banks by issuing UAH debt securities. We also expect Naftogaz’ gap to reach as much as 1% of GDP in 2010. Providing improvement in the real economy, we see the government capable of keeping its public finance deficit within 6.5% of GDP in 2010 and to secure a new IMF deal (it is seeking the approval of a new 2.5-year USD 12-15 bln program) in coming weeks. Underlying assumptions of budget planning were 3.7% real GDP growth and 13.1% inflation in 2010.