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MinFin reports it agreed on 2021 budget parameters with IMF.​ ​Ukraine’s Finance Ministry reported in the morning of November 26 that that it “has successfully completed” talks with the IMF on the basic parameters of the draft state budget for 2021. The ministry claims this was one of the key prerequisites of the first review of the IMF-sponsored Stand-by program, the determination of a date for the IMF’s visit and the next tranche under the program.
However, the Ministry disclosed no parameters of the state budget that have been agreed upon with the fund. Recall, the first draft of the 2021 budget ​was approved by the parliament on November 5​. It assumed a budget deficit of UAH260bn (6% of GDP) and budget revenue growth by 10% y/y in the next year.
Hopefully this will allow MinFin to concentrate its efforts on seeking sources to finance the deficit of this year, including preparations to issue new Eurobonds. Although the news looks encouraging, this is just the start of the budgeting process as the updated budget draft should gain approval by the Cabinet and parliament, which might be challenging. In any case, it is too early to claim that Ukraine has resolved all the outstanding issues with the IMF, which leaves little chance for getting IMF money in the next two months.
6.1.1 ​Budget dynamics - results
Ukraine’s general budget deficit amounted to UAH30.4bn in October, compared to a UAH43.9bn in September​, the State Treasury reported on November 27. Budget revenue increased 8.5% y/y to UAH105.9bn in October, slowing from 10.4% y/y growth in September. General budget expenditures surged 27.2% y/y to UAH136.1bn, accelerating from 23.3% y/y in the prior month. In particular, state budget expenditures advanced 54.1% y/y, while local budget expenditures declined 8.0% y/y.
In 10M20, the general budget deficit amounted to UAH89.4bn (vs. a deficit of UAH0.6bn in 10M19).
Tax revenue increased 10.4% y/y to UAH96.3bn in October, accelerating from 9.7% y/y growth in September. In particular, personal income tax revenue surged 17.6% y/y (vs. 4.4% y/y growth in September). Net VAT revenue surged 51.3% y/y (vs. a 31.7% y/y jump in September), as VAT reimbursement fell 10.7% y/y and gross revenue climbed 11.7% y/y. Meanwhile, enterprise profit tax proceeds plummeted 40.3% y/y (vs. a 41.5% y/y decline in September). Resource royalty payments dropped 14.1% y/y (vs. 30.6% y/y growth in September).
Non-tax revenue dropped 5.4% y/y to UAH9.0bn in October (after increasing 15.0% y/y in September). In particular, the revenue of budget-financed entities declined 15.7% y/y. At the same time, administrative payments and revenue from non-commercial activities jumped 22.0% y/y.
As expected, the growth of budget expenditures reinforced in October was spurred by the populist moves of the authorities ahead of the October 25 local elections. Budget revenues continued to swell, mostly due to high net VAT collections amid both increased gross collections and high VAT reimbursement.
41​ UKRAINE Country Report​ December 2020 ​ ​www.intellinews.com