Page 35 - UKRRptOct21

We expect the presented draft budget will undergo only minor changes during the parliamentary readings. The timely adoption of the realistic budget will increase Ukraine’s chances to receive IMF financing under the current Stand-by program by the end of the year.
Analyzing the draft budget, economist Pavlo Kukhta described it as “appropriate for the current situation.” The government plans to slash the budget deficit from 5.5% in 2021 to 3.5% in 2022. It also expects GDP to grow to 3.8% next year and Ukraine’s revenue to increase 14.4%, to the equivalent of $47 billion. However, Kukhta underscores that this anticipated increase in revenue hinges on the adoption of bill 5600, a controversial draft law that would increase taxes.
In total, the draft budget for 2022 predicts the equivalent of $55 billion in total expenditures (a number that also largely depends on bill 5600). This includes a substantial increase in spending on defense and security to 5.95% of GDP, equivalent to about $12 billion. Kukhta also points out that approximately 40% of this increase is slated to be financed with international assistance from the United States, France, and the UK.
Healthcare spending is set to take up 3.8% of GDP, about $7.35 billion (around $1.3 billion more than in 2021). Though this falls short of the government’s stated target of 5% of GDP, Kukhta praises the decision to plan a significant increase in salaries for Ukraine’s “exhausted” doctors. He also highlights the provision of more than $1.26 billion in subsidies for the 2021–2022 “heating season” as crucial for helping vulnerable people in the face of rising energy costs.
Though Kukhta believes that predicating key budget expenditures on the adoption of bill 5600 and international financial assistance are cause for concern, his main worry seems to be that lawmakers will tinker with the plan. “Now, it’s important to preserve and adopt the 2022 budget in approximately the same form as it was submitted,” Kukhta urges. “This is important for preserving the macroeconomic stability and development of the country.”
6.1.1 Budget dynamics - results
Ukraine’s Cabinet approved a draft budget on September 15 based on a GDP growth forecast of 3.8% and inflation of 6.2%, down from 10% this year. For 2022, the budget deficit would shrink to 3.5% of GDP, down from 5.5% this year, Reuters reports. The average exchange rate would be 28.6 hryvnia to the dollar, 7% weaker than today’s rate of 26.7.
Revenue highlights:
n $2.9bn expected from IMF and other IFIs. n $1.5bn in new Eurobonds
n $43bn in tax receipts
Spending highlights:
n $20bn – pensions
n $7.3bn -- medicine
n $4.5bn -- road building
n $3bn – defence
n $375mn – railroad – 12 new suburban trains; 100 new passenger cars; 300 km of track electrified or upgraded;
n $206mn – rebuilding regional airports
35 UKRAINE Country Report October 2021 www.intellinews.com