Budget 2020 revised: state deficit surged to 7% of GDP

UKRAINE - In Brief 13 Apr 2020 by Dmytro Boyarchuk

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Parliament has just voted in a revised spending plan 2020. The main changes to new budget are: Revenues’ target cut by 10.9% or UAH 119.7 billion;COVID-19 Fund was created – UAH 64.7 billion or 1.5% of GDP;Initial spending (net of COVID-19 Fund) increased moderately by 1.5%;Revised deficit up to UAH 298.4 billion or 7% of GDP Initially Finance Ministry under Ihor Umanskiy submitted to the parliament a spending plan with substantial cut of outlays but with generous financing for COVID-19 Fund (UAH 97.1 billion or 2.2% of GDP suggested initially). However, the proposed revision was rejected by MPs. Ihor Umanskiy resigned shortly after that, as we learned later, due to conflict with Premier Shmygal. New Minister of Finance, Sergey Marchenko, submitted a spending plan, which did not presume spending cut (initial outlays, net of COVID-19 Fund, increased by only 1.5% from initial plan). Hoever, budget of COVID-19 Fund was revised down to UAH 64.7 billion or 1.5% of GDP. As a result, we have substantial revenues’ cut in anticipation of COVID-19 shock. While spending boosted on the back of COVID-19 Fund creation. Deficit is huge – UAH 298.4 billion or 7% of GDP. But officials hope this gigantic fiscal gap will be covered from the IMF loans. The NBU officials openly refused to finance the deficit. Now we’re awaiting approval of so called ‘anti-Kolomoysliy’ law in second reading. The process is delayed due to 16000 (!) edits submitted to the bill (Kolomoyskiy does not give up that easily). But we stay optimistic since president Zelenskiy reamin committed to the IMF course.