Page 42 - UKRRptDec20

Analysts expect the budget deficit to widen further in November-December. However, the state budget deficit is likely to end up below the ceiling of UAH296.7bn set by the budget amendments adopted in April amid the pandemic-related panic.
However, the lower-than-expected budget deficit will be mostly the result of the recent difficulties with finding sources for budget financing rather than the rational attitude to the public finances.
Ukraine state deficit financing underperforms by UAH140mn in 11M20
Income of the general fund of the state budget exceeded its 11M20 plan by 0.4% to reach UAH805.9bn, the Finance Ministry reported on December 1. Meanwhile, expenditures of the general fund underperformed by 9.7% to reach UAH940.6bn in 11M20. The deficit of the general fund reached UAH130.7bn in 11M20, vs. the plan of UAH236.9bn. Such underperformance was the result of severe underfinancing of the deficit as MinFin raised just UAH98.1bn in net debt in 11M20, or UAH140.1bn short of plan.
The 2020 state budget assumes total income of UAH976bn (including income of the general fund of UAH855bn), expenditures of UAH1,266bn (including UAH1,135bn of the general fund) and a deficit of UAH291bn.
Out of UAH101bn of planned budget expenditures that have not been spent in 11M20, some portion is likely to not be spent at all due to a lack of necessity (as the budget plan, adopted in a rush amid the beginning of the corona crisis in mid-March, foresaw some excessive spending). At the same time, the root of a significant part of the underperformance of state expenditures is the inability of MinFin to secure respective debt financing of the deficit.
We estimate that in December alone, MinFin will have to attract net financing of at least UAH100bn (or about $4bn) to finance all the necessary budget expenditures for 2020. Such an amount is impossible to borrow domestically, as the results of local bond tenders are showing. Therefore, the only way to finance the deficit is to secure external financing. As money from the IMF (the equivalent of $2bn planned for September-December) is not yet available, as well as money from the EU (the equivalent of $1.45bn) and World Bank (about $0.35bn), the only viable way for Ukraine to secure financing is to place international bonds.
6.1.2 ​Budget dynamics - specific issues...
Taxes on sales of electronic and household appliances could be up by one quarter​ in hryvnia this year, reports the Statistics Service. With the January-September sales taxes figures just below the level for all of last year, the Service expects that about $425mn will collect.
Ukraine’s parliament voted on December 1 to delay the introduction of state-issued electronic cash registers until January 1, 2022 in response to mass protests by thousands of small and mid-sized individual entrepreneurs​. The measure was supported by 319 MPs representing all five parliamentary factions. Besides the delay, the bill cancels the cashback incentive for consumers to report register violators, reduces the list of activities considered to be risky, and ties all limits to the minimum wage rate. A
42​ UKRAINE Country Report​ December 2020 ​ ​www.intellinews.com