Ukraine Cabinet submits 2020 budget for second reading

Ukraine’s Prime Minister Oleksiy Honcharuk announced
revised parameters of the 2020 state budget at a press briefing on Nov. 5. The
revisions will be submitted for a vote after the budget’s first reading was
approved by parliament on Oct. 18. State budget revenue is planned at UAH 1,094
bln (6.6% higher from the 2019 budget), while outlays are pegged at UAH 1.180
bln (+6.1% from the 2019 budget). The budget deficit is expected at 2.09% of
GDP (vs. 2.28% in the 2019 budget). With these parameters, the GDP distribution
through the budget should decline to 24.2% (from estimated 26.0% in 2019),
while debt-to-GDP ratio should decline to 52.4% (vs. 62.0% in 2019), according
to Cabinet’s estimates.

The monthly minimum wage is set to rise to UAH 4,723
from UAH 4,173 in 2019. The 2020 budget also assumes a significant increase in
outlays for pensions (+40%), infrastructure (+37%), defense and security
(+16%), and public health and education (+13%).

In related news, Finance Minister Oksana Markarova
noted that budget revenue was revised higher by UAH 13 bln and spending was
raised by UAH 15 bln from the first reading. This revenue hike is expected to
be supported by an expected UAH 3 bln gain from licensing casinos and gambling,
as well as boosted dividends of state-owned companies, enterprise profit tax
collections, and rent from state property.

Evgeniya Akhtyrko: The major
budget parameters look quite realistic. They are based on the cabinet’s
base-line macroeconomic forecast, which assumes GDP growth of 3.7% yoy and consumer inflation 5.5% YTD
in 2020.

This document will likely be approved in the second
reading in parliament next week with minor changes. Recall, the adoption of a
credible budget is a major condition for Ukraine to continue talks with the IMF on a new loan deal.