Ukraine budget revenue increases 4.5% yoy in July

Ukraine’s state budget collections increased 4.5% in July compared to a 6.7% yoy decline in the prior month, the state Treasury reported on August 1. For 7M14, budget revenue reached UAH 204.5 bln, which is 7.7% more than a year ago but nevertheless a UAH 16.4 bln shortfall. VAT reimbursement for exporters was reported at UAH 4.7 bln in July, which is 21.7% less than a year ago (UAH 25.1 bln for 7M14, which is -25.1% yoy).

Alexander Paraschiy: Rising budget revenue in July is a good sign, indicating the situation with public finances remains manageable though definitely worse than initially expected. Poor VAT reimbursement (1/4 less than a year ago) indicates the Cabinet is strapped for cash. At the same time, the growth in state collections, against the backdrop of a war, is an encouraging sign. The recent budget amendments that increased the royalty on hydrocarbon and iron ore extraction and imposed a wartime income tax only adds optimism to fiscal prospects.

Typically it’s difficult to project a budget’s performance in the face of huge uncertainty related to the military operation. However, after the Cabinet identified compensators for the expected state collections shortfall, there’s a strong chance to meet the committed state deficit target (4.5% of GDP for the central budget and 5.1% of GDP for the general budget) without postponing payment on obligations or building up more debt.