Spending Plan 2018: Subsidies cut, Reforms Budgeted

UKRAINE - In Brief 20 Sep 2017 by Dmytro Boyarchuk
Macro-parameters are in line with our projections. Finance Ministry projects 3.0% of GDP growth (exactly what we expect), 7% consumers’ inflation (we project 6.9%) and UAH 29.3/USD (UAH 29.8/USD). Nominal GDP is expected to reach UAH 3 247.7 billion (UAH 3 217.3 billion);Budget deficit fits to the IMF requirement. Spending plan envisages deficit 2.4% of GDP vs. 2.5% of GDP limit outlined at the latest Memorandum;Privatization revenues target increased up to UAH 22.5 billion from UAH 17.0 billion. Privatization proceeds are allocated for deficit financing;VAT on import generates ¾ of budget revenues in 2018. Rent on mineral extraction drops. Also budget presumes decrease in revenues from state enterprises.Substantial increase in spending on defense and law enforcement. Also doubled spending on roads repairing; Housing subsidies have been cut. However, some officials claim the funding was underestimated and project upwards revision of housing subsidies through course of the year;Pension fund subsidy remains flat. The anticipated growth from increased minimum wages and relatively modest increase in pensions are the main reason for that. Pension reform, which is expected to be approved soon, will not affect much Pension Fund budget in 2018;Education reform in the budget. Budget envisaged transfer of vocational schools to the local level. Previously, vocational schools have been funded from the central budget;Increased funding for judicial system. Financing of state judicial administration was increased by more than 50%. It reflects judicial reform which presumes substantial increase in salaries for judges that passed qualification commission this year;No tax changes in 201...

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