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07.10.2009
Credit-Rating: Ukraine’s Budget System in 1H2009 and Outlooks for 2010
The preserving downward trends in social and economic development has been underpinned by the following factors: apart from decline in income tax earnings, which were envisaged for 1H2009, the shrinking volumes of other types of earnings also had impact on the consolidated budget, specifically those of the value added tax, tax from capital transactions, and of special-purpose funds. The local budgets have encountered shortages in earnings from individuals’ tax, general tax, and fares for trade licenses, coupled with next to zero incomes to development budgets, with which capital investments are executed.
The low pace of incomes to the budget has become one of the major grounds to renew reforming budgetary and fiscal legislation. On June 23, 2009 the Ukrainian parliament amended the Budgetary Code, which further were vetoed by the President and thus did not come into effect. Moreover, the draft of the Tax Code has been anew rejected, with the probability for the amended draft to be passed remaining low. As a result the state budget and fiscal policy in 2010 will be executed with no expected positive shifts in legislation, which considerably hampers earnings to the budget in the upcoming budget period.
Despite that, on September 15, 2009 the Government has registered a bill titled The State Budget for 2010, in the course of which development the amended norms of budget and fiscal legislation were took into consideration. This approach is justified in terms of economics, though may considerably hinder the bill’s adoption. The State Budget in the upcoming year may be strained by the following factors: the anticipation of positive macroeconomic indicators in 2010, absence of necessary changes in legislation, modest figures of earnings in 2009, and significant increase in social standards, which is not underpinned materially (in case the latest version of the bill on raise of minimal salary and minimum of subsistence is passed).
Under lack of budget earnings and rising necessity in additional resources for execution of counter-crisis measures, the state debt policy, like in the current year, will be driven by needs of funding the budget urgent expenditures. It is expected that the direct debt burden on the State Budget will remain moderate, though the growth trend will be retained owing to planned covering the budget deficit with the domestic bonds, and increase in external debt calculated in national currency due to its depreciation. The dynamic of direct municipal debts will be contingent upon the amount of funds attracted from the general treasury account. At that, the growth in the volume of municipal borrowings, including via bond issuances, will be weighed by downward trend in capital markets.
Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG information systems.
For more information, please contact:
Information and
analytic department
Sergey Rozumyak +38044490 25 50
SRozumyak@credit-rating.com.ua
Denis
Rudenko
DRudenko@credit-rating.ua
