State budget performance: January 2020
According to the State Treasury Service’s preliminary data on budget performance in January 2020, the revenues of the state budget’s general fund amounted to UAH 42.6 billion and were by UAH 13.8 billion less than the monthly plan. The main reason for the underperformance of revenues was the significant changes in macroeconomic indicators compared to the government forecast approved in October 2019. This is, in particular, a stronger Hryvnia exchange rate (the average exchange rate in January was UAH 24.1 / USD, while the budget is planned with the average annual exchange rate of UAH 27 / USD), lower imports (by 2.5% yoy) and lower gas prices.
According to preliminary data, the revenues of the general fund of the state budget from taxes and fees (including the VAT reimbursement) administrated by the State Tax Service were by UAH 5.9 billion lower than planned due to the following reasons:
- excise tax revenues from manufactured goods in Ukraine were by UAH 2.2 billion lower than in the first half due to lower level of tobacco products’ production and lower sales of stock products from which excise duty has already been paid;
- proceeds from rent payments were by UAH 2.4 billion lower than the plan. This is due to a decrease in gas prices, as well as a failure to meet the planned volume of internal gas production;
- the shortfall on the personal tax was UAH 0.24 billion;
- the VAT revenues including VAT reimbursements were UAH 2.5 billion lower than planned due to VAT reimbursements of UAH 18.0 billion that is higher than the average monthly reimbursement made last year (UAH 12.7 billion in 2019);
Revenues of the general fund of the state budget from taxes and fees, administrated by the State Customs Service, were by UAH 7.9 billion lower than planned due to the following reasons:
- a stronger Hryvnia exchange rate compared to the one forecasted in the state budget (the average annual rate was forecasted at UAH 27 / USD, while the average rate in January was UAH 24.1 / USD);
- according to the State Customs Service, the decrease in taxable imports was 2.5% yoy, while it 11.3% increase in imports of goods was budgeted;
- import of petroleum products (gasoline, diesel) decreased from 248.7 thousand tons in January 2019 to 181.7 thousand tons in January 2020;
- import of coal and coke coal decreased from 1 419.2 thousand tonnes in January 2019 to 957.5 thousand tonnes in January 2020;
- import of machinery and equipment decreased from 3 348 tonnes in January 2019 to 678 tonnes in January 2020.
In January 2020, compared to the same period in 2019, there was a decrease in prices for certain groups of goods, due to the decrease in world prices for such goods. In particular, according to the State Customs Service, the average customs value of certain goods decreased in January 2020 compared to January 2019:
- natural gas from USD 324 / thousand m3 to USD 173 / thousand m3;
- bituminous coal from USD 0.16 / kg to USD 0.09 / kg;
- polyesters in primary forms from USD 1.31 / kg to USD 1.01 / kg;
- fungicides, herbicides, insecticides, rodenticides from USD 21.8 / kg to USD 17.7 / kg;
- ores and manganese concentrates from USD 0.18 / kg to USD 0.13 / kg.
According to the State Customs Service, there was also no taxable import of goods under 598 commodity subcategories, which in January 2019 provided VAT and import duties in the amount of UAH 476.4 million.
Macroeconomic stability and efficient public debt management enabled Minfin to succeed in fulfillment of the borrowings plan both domestically and internationally. Ukraine issued EUR 1.25 billion 10Y Eurobond at a record low coupon rate of 4.375%. On January 28, 2020, the Ministry of Finance successfully placed 7-year domestic government bonds with an average yield of 9.79% on the domestic market (the last securities with a similar maturity were issued more than five years ago at the rate of 15.5%). The total borrowings to the general fund of the state budget amounted to UAH 50.8 billion in January (of which UAH 16.9 billion were borrowed on the domestic market). The redemption of state debt in January amounted to UAH 31.6 billion.
In January, the expenditures were fully financed according to the plan.
Based on the January data, The Ministry of Finance will initiate a series of measures to respond appropriately to objective factors affecting revenues and expenditures of the state budget to offset the negative impact of current factors during the year.
The Ministry of Finance is actively working with the main spending units on the procedures for the use of budgetary funds and the approval of passports of budget programs is ongoing. Active work on the Budget Declaration for 2021-2023 has been started.