Page 32 - UKRRptOct22

draft budget assumption of nearly 5% real growth in GDP in 2023 may prove optimistic.
Second, the budget assumes higher inflation and a further significant weakening of the currency. Arithmetically, this helps the public finances, allowing FX funding to finance more hryvnia spending and squeezing budget spending, as government wages, pensions and spending lag inflation. But this risky path flirts with a currency crisis and risks entrenching high inflation, which could undermine the war effort.
While $50bn sounds large, it represents only one tenth of 1% of the GDP of Ukraine’s allies, 4% of NATO’s annual budget, and 9% of the spending announced so far by European countries on helping consumers with energy costs.
In addition, analysts note that the financing need not entail a call on government’s budgets. In particular, Ukraine’s allies can make contributions in the form of Special Drawing Rights (SDRs), the IMF’s special currency; G7 countries’ combined SDR holdings stood at $410bn as of end-August, enough to finance Ukraine’s 2023 needs multiple times.
6.1.1 Budget dynamics - results
Ukraine has calculated the losses from the termination of gas transit from the Russian Federation. If the transit of Russian gas through Ukraine stops in January 2023, and there is no payment for reserved capacities, the state budget in 2023 would not receive UAH 11.15B, according to the appendices to the draft state budget for 2023. For example, if there are no revenues from gas transit, the Ukraine GTS Operator will not be able to pay UAH 5.87B of VAT and UAH 5.28B of income tax to the state budget. Due to war damage to the gas pipeline, the loss of control at the Sokhranivka entry point, and Gazprom's failure to fulfill the terms of the gas transit contract, the Ukraine GTS Operator has already lost a portion of its revenue. As a result, payments to the state budget in the first half of 2022 decreased to UAH 3.43B ($94M). In comparison, in 2020, Ukraine made $3B from the Russian gas transit.
Tax revenues for the Ukrainian budget increased by 15%. The consolidated budget received UAH 811.7B in tax payments for the nine full months of the current year. According to the State Tax Service, this is 15.3%, or UAH107.9B, more than from the same period last year. The state budget received UAH 536.1B, which is UAH 74.8B, or 16.2%, more than last year's corresponding period. Revenues to the state budget's general fund in January - September this year amounted to UAH 533.3B, 18.6%, or UAH 83.7B more than from the same period last year. In September, tax payments to the consolidated budget amounted to UAH 85.7B, with UAH 53.2B going to the state budget and UAH 32.5B to local budgets.
Government approves draft budget for 2023, 50% of expenditures on defense, security. Prime Minister Denys Shmyhal said that the draft budget's expenditures on security and defense are four times bigger compared to the previous year, amounting to Hr 1.136 trillion ($30.7bn). The deficit is set at over $3bn per month. The draft budget is yet to be approved by the Ukrainian parliament.
32 UKRAINE Country Report October 2022 www.intellinews.com