Page 34 - UKRRptMay20

fiscal deficit to decline to 3.4% in 2021. "General government debt will jump to 57.1% of GDP (64.0% of GDP including guarantees) and 57.4% in 2021, from 44.4% (50.4% with guarantees) in 2019 and close to the forecast 60% 'B' median, due to the wider deficit and sharp hryvnia depreciation (forecast at 25% yoy in 2020)," Fitch said.
Net borrowings of MinFin for the rest of the year are planned at $10bn equivalent​. Together with external loans due in the rest of the year ($4bn) and internal debt due ($4bn equivalent), the government's total financing and refinancing needs will amount to $18bn. In case of an IMF deal, Ukraine could secure financing (together with related multilaterals) of just $6-8bn. Provided all the official support is secured and all the internal debt due in 2020 will be rolled over, Ukraine will have to seek for additional financing of $6-8bn in the rest of 2020. Therefore, even in case Ukraine resumes the IMF program, state deficit financing and repayment needs will be a challenging (but doable) task. Without the IMF deal, the gap will increase to $14bn, which is impossible to finance. Therefore Ukraine does not have the ability to avoid default without the IMF deal. Analysts continue to expect the IMF deal as the base-case scenario for Ukraine.
6.1.1 ​Budget dynamics - results
Ukraine’s 2020 state budget revenues are to be reduced by UAH119.7bn, or 11%, ​to UAH975.8bn, according to the bill on state budget amendments published on the Verkhovna Rada website on April 11.
Budget expenditures are to increase by UAH82.4bn, or 7%.
As a result, the budget deficit ceiling will increase more than three times to UAH296.7bn​. Privatization receipts are expected at UAH0.5bn (vs. UAH12bn previously).
The amendments to budget were made on April 13 and include the creation of a state fund on fighting Covid-19 of UAH64bn. ​In addition, expenditures on public health will increase by UAH15.8bn. Pension fund expenditures will rise by UAH29.7bn. At the same time, the expenditures on housing subsidies are cut by UAH8.2bn. The new bill also assumes lower expenditures on regional development (by UAH2.6bn), sports (by UAH2.3bn), and local communities support (by UAH2.1bn).
Ukraine budget revenue 12% below plan in 1Q20​. ​Ukraine's state budget stayed flat y/y at UAH210.7bn in 1Q20, which is 11.6% below plan, the State Treasury provisionally reported on April 2. Net tax revenue jumped 14.9% y/y to UAH110.8bn (5.6% below plan) amid 5.9% y/y growth in gross tax revenue and a 13.1% y/y fall in VAT reimbursement. Customs revenue plummeted 15.7% y/y to UAH40.7bn (23.3% below plan).
Local budgets' fiscal revenue improved 14.5% y/y to UAH69.3bn in 1Q20, which is 7.4% below plan​. Social payments (pension and other social fund contributions paid by employers) advanced 16.6% y/y to UAH69.4bn.
In March alone, state budget revenue increased 2.4% y/y to UAH87.9bn, which is 10.4% below plan​. Net tax revenue increased 8.1% y/y to UAH51.3bn (5.8% above plan) amid 3.1% y/y growth in gross tax revenue and a 15.5% y/y fall in VAT reimbursement. Customs revenue declined 10.8% y/y
34​ UKRAINE Country Report​ May 2020 ​ ​www.intellinews.com