Page 36 - bne IntelliNews Country Report: Ukraine Dec17

260 lawmakers backed the motion, more than minimum of 226 votes needed to pass the law.
The budget deficit target for 2018 is 2.4% of GDP, real GDP growth is 3% year-on-year and inflation it 7%.
The budget deficit target is lower than what the International Monetary Fund (IMF), Ukraine's main donor, has called for -- 2.5% of GDP -- meaning that the spending plan has good chances for positive feedback from the IMF, Kyiv-based experts believe .
Meanwhile, the forecast hryvnia exchange rate for late 2018 is UAH30.10 per US dollar in the government's bill on the national budget. Taking into account this exchange rate, direct state debt as of early 2019 would be almost UAH2 trillion or 61.5% of GDP, guaranteed state debt would be UAH747.55mn and total state debt would reach 84.6% of GDP.
Earlier, Ukrainian President Petro Poroshenko enacted a decision of the country's National Security and Defence Council (NSDC) to increase security and defence spending in 2018 to UAH165bn (€5.271bn). According to Ukraine's state budget, security and defence spending in 2017 should be financed at the level of UAH143.6bn.
Ukraine’s consolidated budget saw a sizable reduction and ran a cash deficit of UAH10.4bn ($0.4bn) in October, narrowing from UAH27.0bn ($1.0bn) in September and bringing the YTD positive cash balance to UAH31bn ($1.2bn), up from a deficit of UAH27bn ($1.0bn) in 10M16.
The sizable narrowing of the cash deficit in October was mainly caused by a m/m drop in debt service outlays after a $0.5bn semi-annual coupon payment on sovereign Eurobonds in September and resumption of NBU profit transfers. These positives were partially offset by a repayment of accrued coupon on domestic bonds to the NBU as part of a reprofiling of UAH220bn of domestic bonds in the NBU portfolio and increased transfers to the Pension Fund to finance an October pension hike approved as a part of IMF-required pension reforms.
Accounting for Pension Fund dynamics, Dragon Capital estimates 10M17 general government revenue growth slowed to 39% y/y (to UAH951bn), after peaking at 45% in 4M17, mostly driven by an expected slowdown in non-tax receipts caused by a higher comparison base. Still, growth in non-tax receipts was strong at 94% y/y in 10M17, fuelled by a one-off inflow of $1.1bn (UAH29bn equiv.) confiscated from ex-President Yanukovych’s allies in April, sizable dividends from SOEs (UAH23bn in 10M17, +140% y/y) and timely transfers of NBU profits (UAH35bn in 10M17 vs UAH10bn in 10M16).
Growth in tax receipts remained stable at 31% y/y in 10M17 , supported by VAT (esp. VAT on imported goods, personal income tax and social security contributions, and reflecting buoyant merchandise imports, broader economic recovery, and the doubling of the minimum monthly salary to UAH3,200 from January 2017. At the same time, general government spending expansion continued to accelerate gradually (+29% y/y in 10M17 to est. UAH918bn), as the October pension hike and rising capital spending amplified already high outlays in the education and healthcare sectors, boosted by the minimum salary hike, and sizable utility subsidies, which almost doubled y/y in 10M17.
36 UKRAINE Country Report December 2017 www.intellinews.com