Page 37 - bne IntelliNews Country Report: Ukraine Dec17

6.1.1 Budget dynamics - specific issues...
Ukraine's general budget revenue growth slowed to 19.2% y/y in October from 23.4% y/y in September , the State Treasury reported on November 27. The main growth drivers were value-added tax (41% y/y growth), excise duties (38% y/y) and personal income tax (35% y/y). Dividends from the NBU dropped 50% y/y to UAH5bn. Rent on mineral extraction also fell by 38% y/y. For 10M17, general budget revenue grew 38.5% y/y.
Spending in October sped up to 44.6% y/y growth and created a UAH10.4bn general budget deficit . The central budget was the main source for the fiscal gap (UAH13.6bn deficit) while local budgets were in surplus (UAH3.2bn). For 10M17, the general budget was still in the black (UAH31.2bn surplus) with a UAH29.8bn surplus at the local level and only a UAH1.4bn surplus at the central budget.
Budget revenues remain in good shape with only two months left in the year . In the remaining time, collections will ease due to a high comparative base (last year, the NBU transferred the main bulk of its dividends onto the last two months of the year). However, the core taxes generate strong revenues and we still expect budget collections to meet the Finance Ministry's 27.5% y/y revenue growth target for 2017. Revenues are not a problem, but spending is now an issue. Average monthly outlays for 10M17 were UAH79.3bn per month.
The largest monthly spending was in September at UAH101.3bn. Yet the 2017 spending plan calls for UAH306bn to be disbursed just in two months (November-December) with the major part of that sum allocated for December. This schedule poses substantial hryvnia depreciation and inflation risks. Therefore, it's very likely the government will decide to reduce its fiscal spending much less than planned, meaning that the budget deficit will be below 3% of GDP in 2017. The unspent costs will be transferred to next year's budget.
6.1.2 Budget dynamics - funding & privatization
Ukraine is going to issue $2bn on debt markets in 2018 , the country's Finance Minister Oleksandr Danylyuk told Reuters in an interview on November 24. On September 18, Ukraine placed $3bn in 15-year Eurobonds at 7.375% per annum, after Kyiv mandated JP Morgan, BNP Paribas and Goldman Sachs as bookrunners for its new Eurobonds issue . The deal has become a first market placement for the country since the victory of the popular uprising in February 2014. "We will not rush to the market, but we have a good story to tell to investors," he said. The money would help meet Ukraine's debt repayments and International Monetary Fund (IMF) money would go towards building up currency reserves. The National Bank of Ukraine (NBU) expects to receive $3.5bn in financing from the country's main donor, the IMF, $1.5bn proceeds from Eurobond placement and $500mn in financing from the World Bank in 2018, according to the regulator's November inflationary report. The NBU expects that next IMF tranche will be received in the first quarter of the next year. Along with a surplus of the overall balance of
37 UKRAINE Country Report December 2017 www.intellinews.com