Ukraine budget surplus surges to UAH 26.9 bln in August

Ukraine’s general budget balance switched to a surplus
of UAH 26.9 bln in August from a UAH 2.1 bln deficit in July, owing to slower
spending growth, the State Treasury reported on Sept. 25. General budget
revenue increased 17.1% yoy to UAH 117.3 bln, decelerating from 19.1% yoy
growth in the prior month. Meanwhile, budget expenditures rose 7.1% yoy to UAH
90.4 bln, slowing from 24.0% yoy growth in July.

Tax revenue increased 17.7%, slowing from 28.4% yoy
growth in July. In particular, the enterprise profit tax advanced 30.9% yoy
from 13.4% growth in July. Meanwhile, rent payments for the use of natural
resources declined 32.5% yoy due to a high comparative base in August 2017,
when rent payments surged almost 6 times m/m. Personal tax income advanced
24.0% yoy, while net VAT receipts increased 23.3%.

Non-tax revenue picked up 10.3% yoy after declining
27.5% yoy in the previous month. In particular, income from ownership and
entrepreneurship increased 13.6% yoy after plummeting 77.5% yoy in July.

In 8M18, the general budget posted a surplus of UAH
35.1 bln amid revenue growth of 15.3% yoy and an expenditure surge of 22.7%
yoy. General budget revenue has already met 67% of the 2018 plan in 8M18, while
expenditures are at 57%.

Evgeniya Akhtyrko: Government finance managers, both centrally and locally, slowed down
the pace of budget expenditures after the general budget was in deficit during the two previous months. In 8M18, Ukraine’s domestic borrowing amounted to
UAH 114.4 bln, or 92% of annual plan. At the same time, external borrowing
totaled UAH 23.9 bln in 8M18, which is only 22% of annual plan. The weak receipts at recent domestic bond
auctions point to the waning
ability of the domestic market to generate debt resources for MinFin.
Meanwhile, we believe Ukraine will not gain access to affordable resources on
the global markets until it secures the IMF loan tranche.