Budget approved but… to be revised within a month

UKRAINE - In Brief 29 Dec 2014 by Dmytro Boyarchuk

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Last night parliament approved spending plan 2015. In essence we cannot even comment on the document which was approved since none ever seen the one (according to MPs). We assume the document is close to the spending plan initially submitted to the parliament but with some changes MPs discussed. In particular, MPs suggested some additional sources of revenues (like revenues from 3G license sale) and the Cabinet agreed to cut payroll tax more than twice to 16.4% from near 37% currently Discussion of the spending plan continued till early morning of December 29 and the document was approved only after prime-minister Arseniy Yatsenyuk promised to revise the budget after the IMF mission visit in early 2015. All in all, it looks like the approval of the budget was very nominal (since none knows for sure what was voted in) and it was done just to report that we have the budget. Probably, as soon as the IMF mission arrives the Cabinet will put the document on the table and will ask to cut everything what is needed to receive new wire from the Fund. Virtually it will be very convenient politically for Yatsenyuk to report that he wanted to protect people but it was the evil IMF that demanded more budget cuts. That is how we interpret the story for the moment. In essence it is not bad. For sure, the authorities will have to maneuver politically but the crucial point is their readiness to comply with the IMF. If they are just creating convenient excuses to put responsibility for painful changes on the Fund (but are ready to comply) then we are on the right way out. Interesting that Yatsenyuk easily agreed to cut payroll tax. It also looks like a kind of political game. Such tax c...