Ukraine central budget revenue surges 41% in February

Central budget revenue jumped 40.5% yoy to UAH 38.0 bln in February 2015, up from UAH 27.0 bln a year ago, according to Ukraine’s MinFin report of March 30. Throughout the month, the NBU transferred UAH 5.5 bln to the budget (compared to UAH 4.8 bln a year before). Also a large part of the increase was due to the redistribution of revenues from local budgets to the central budget. In particular, central budget revenues from personal income tax surged 6.4x to UAH 4.3 bln in February vs. UAH 0.6 bln the previous year. The state collections, net of NBU transfers and redistribution of local budget revenues, increased just 30.5% yoy.

At the same time, good progress in the collection of VAT was reported. VAT revenues (counting VAT reimbursement) surged 72.4% yoy. The state deficit was reported to be a record high in Jan-Feb 2015 at the level of UAH 8.7 bln (UAH 5.3 bln a year ago). At the same time, the general budget deficit was almost zero at UAH 0.3 bln vs. UAH 2.4 bln a year ago.

The authorities have targeted a 38.1% increase in state revenues for 2015 according to the new spending plan.  The central budget deficit has been outlined at the level of UAH 75.8 bln (4.1% of GDP).

Alexander Paraschiy: Such positive results for February are really surprising. An upsurge in VAT collections against the backdrop of a 21.8% yoy organized retail trade slump looks really strange. The explanation for such results could be the sharp hryvnia devaluation which has translated into a jump in the customs value of imported products and subsequently into higher state collections. More detailed treasury reports later on might reveal a better explanation for such unexpected fiscal success.

Surely, if the state revenue growth path remains at the levels recorded in February, the MinFin will be able to meet the targeted budget revenues level. However, for the moment we see the outcome as accidental and anticipate a slowing of the growth rates in state collections, due to falling consumption.