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increasing spending.
Parliament supported budgetary changes in April, which resulted in the deficit “more than tripling: from UAH96 to UAH298bn” from approximately $3.5bn to more than $10.7bn. “This means that almost every fourth hryvnia of state budget expenditures in 2020 should be financed by attracting new debts,” Marchak and Korzh point out.
Taking all of this into account, the Ukrainian government is now aiming to attract UAH653bn (nearly $23.6bn) — that’s twice the amount of debt financing. And funding from international partners (mainly the IMF) has been the main reason that the Finance Ministry has been able to implement this plan so far.
That said, Marchak and Korzh predict that attracting funding will be even more difficult in the second half of the year. “The key debt burden is planned for July–December 2020,” they write, explaining that Ukraine needs to attract UAH355bn (about $12.8bn) during this period. “[That’s] 36% more than was pulled in from January–June.”
And if Ukraine’s Finance Ministry is to achieve this goal, it’s going to need more than just support from abroad.
“It’s extremely important for lawmakers to ‘not interfere’ with the Finance Ministry doing its job. And refrain from further increasing the deficit or violating the terms of cooperation with international partners” Marchak and Korzh warn. If not, Ukraine’s Finance Ministry will be left unable to fund capital expenditures, meaning politically important projects will face cuts.
6.1.1 ​Budget dynamics - results
Ukraine’s general budget revenue jumped 50.5% y/y to UAH153.4bn in June​ after dropping 25.3% y/y in May, the State Treasury reported on July 24. General budget expenditures climbed 7.0% y/y to UAH122.2bn after growing 3.8% y/y in the prior month. The budget balance switched to a UAH28.6bn surplus from a UAH21.3bn deficit in May.
In 1H20, the general budget deficit amounted to UAH3.3bn (vs. a surplus of UAH21.0bn in 1H19).
Non-tax revenue doubled y/y to UAH75.7bn in June (after declining 73.9% y/y in May). In particular, income from ownership and entrepreneurship increased 2.5 times y/y. In addition, the revenue of budget-financed entities advanced 69.6% y/y. At the same time, administrative payments and revenue from non-commercial activities declined 16.5% y/y.
Tax revenue inched up 1.0% y/y to UAH89.2bn in June, after a 12.6% y/y decline in May. In particular, net VAT revenue jumped 85.5% y/y (vs. 11.0% y/y growth in May), as VAT reimbursement declined 14.5% y/y and gross revenue advanced 10.8% y/y. In addition, personal income tax revenue inched up 0.5% y/y (vs. a 5.3% y/y decline in May).
Meanwhile, resource royalty payments plummeted 60.6% y/y (vs. a 38.9% y/y drop in May). Enterprise profit tax revenue dropped 73.3% y/y (vs. 5.2% y/y
41​ UKRAINE Country Report​ August 2020 ​ ​www.intellinews.com