Ukraine central bank quadruples budget support in January

The National Bank of Ukraine (NBU) wired UAH 4.0 bln to the state budget in January, NBU council member Roman Shpek reported on February 13. This month, fiscal needs may require doubled NBU injections, according to Shpek.

Alexander Paraschiy: State budget revenue increased 9.1% yoy in January, according to a delayed report of the State Treasury. Against the backdrop of the political crisis and devalued national currency, such collections growth could be viewed as a success. However, it appears now that only NBU injections to the budget (UAH 4.0 bln vs. UAH 1.0 bln a year ago) were the main driver of state revenue growth for the month. Otherwise, the Treasury would have reported a 4.1% yoy revenue drop.

In light of the ongoing political confrontation and recent steps restricting importers’ access to the ForEx market (with subsequent growth of black market imports) we expect that state collections will only worsen. Even before the hryvnia decline, we estimated nearly a UAH 35 bln revenue shortfall for the year. But now, after seeing the high risk of private consumption sliding owing to more expensive imports, we estimate the state collections shortfall to reach up to UAH 50 bln in 2014. Against this backdrop, we see the fiscal gap approaching 8.5% of GDP by the end of the year, which is almost 3x above a safe level of 3% of GDP.