Budget revenues down 8.1% y/y in June

UKRAINE - In Brief 04 Jul 2013 by Dmytro Boyarchuk

---

Budget revenues declined 8.1% y/y in June, according to Treasury report on July 3rd.  That was already third month in row state collections have been sliding.  For the first six months of the year state revenues went down 0.3% y/y (against 4.9% y/y 2013 revenues plan).  Such trend confirms our view that Ukraine is on its way to serious fiscal problems.  Even estimating optimistically, budget shortfall will be at least UAH 20 billion wider than initially targeted (near 5.5% below the central budget revenues plan).  Still we see low chances for the Cabinet to start printing money actively against the growing risks for new hryvnia devaluation wave.  In our opinion, MinFin will opt to accumulate arrears, which should keep cash-based deficit near 3.5% GDP for central budget. Meanwhile the authorities are in rush for solving the problem.  Today the parliament will be considering two draft laws, which the authorities name critical for public funds. The first one is on transfer pricing and the second one is on extending possibilities for promissory notes use.  If transfer pricing law looks acceptable for many players, promissory notes initiative raises many issues. In particular, when real sector is in recession more quazi-money in use might trigger even more problems for budget revenues.  Let alone the corruption capacities the promissory notes are expected to create.  Still the authorities are determined to push forward this dubious draft law today since it is the last day of the parliament session (next session starts only in September). Against this backdrop insiders report about really tough situation at the Treasury.  It appears that Treasury statistics, though that pess...