Ukraine budget switches to UAH 10 bln deficit in June

Ukraine’s general budget switched to a deficit of UAH
9.7 bln in June from a UAH 3.2 bln surplus in the prior month, the State
Treasury reported on July 23. General budget revenue declined 6.4% yoy to UAH
143.6 bln after surging 54.3% yoy growth in May. General budget expenditures
increased 24.5% yoy to UAH 152.1 bln, accelerating slightly from 24.0% yoy
growth in May.

In 1H21, the general budget deficit amounted to UAH
14.6 bln (vs. a deficit of UAH 3.4 bln in 1H20).

Non-tax revenue dropped 50.2% yoy to UAH 38.5 bln in June
(after surging 169.7% yoy in May). The decline was due to an 82.6% yoy drop in
revenue from ownership and entrepreneurship. Meanwhile, the revenue of
budget-financed entities jumped almost three times year-on-year; administrative
payments increased 42.1% yoy.

Tax revenue jumped 37.9% yoy to UAH 104.4 bln in June,
slowing from 45.4% yoy growth in May. Net VAT revenue increased 26.3% yoy (vs.
a 62.1% yoy surge in May), as gross VAT revenue increased 13.0% yoy and VAT
reimbursement increased 3.2% yoy. The revenue from personal income tax
increased 29.1% yoy (vs. 26.6% yoy growth in May). In addition, enterprise
profit tax surged more than six times year-on-year; royalty payments on the use
of natural resources jumped more than two-fold year-on-year.

Evgeniya Akhtyrko: The switch
of the budget to a deficit was in line with our expectations. A year-on-year
decline of non-tax revenues in June is not a problem, as it was caused by a
high comparative from June 2020 when the respective budget item surged due to
dividends paid by state-owned entities. Meanwhile, the growth of tax revenue
remains impressive.

The budget deficit will continue to enlarge in 2H21.
The growth of revenue will slow down as the effect of the low comparative base
of the previous year wears off.