No Obvious Changes in Draft 2007 Budget.

The government today published its draft 2007 state budget with UAH 140.3 bn of revenues (up from UAH 124.9 bn in 2006, or 12.3%), 153.5 bn of expenditures (up from UAH 137.1 bn, or 12%) and a maximum deficit of UAH 15.1 bn (up from UAH 12.9, or 17%). The budget assumes an average exchange rate of 5.1/$ and GDP of UAH 594 bn, so the above figures translate to revenues of $27.5 bn (23.6% of GDP), expenditures of $27.5 bn (25.8% of GDP), and a maximum deficit of $2.96 bn (2.54% of GDP). The budget’s expenditures are divided into UAH 115.3 bn for consumption and UAH 38.8 bn on development, roughly similar to last year’s proportions of 106.1 bn for consumption and UAH 30.7 bn on development. Note that the budget numbers differ substantially from those announced at a press conference yesterday. Alexander Viktorov: While the new government has been saying its budget will reduce the budget’s proportion of GDP and shift resources from consumption to investment, we see little change in either regard. The biggest change is a reduction in the portion of profits that state-owned companies are obliged to turn over to the state, from 50% to 15%, which is good for state-run companies such as Ukrnafta (UNAF: HOLD), Ukrtelecom (UTEL: BUY) and GenCos.