The Monitoring of Main Indicators of Budget and Banking Systems of Ukraine

It contains a brief analysis and selections of graphs and charts illustrating the main changes occurring in the budget and banking systems of Ukraine. The publication is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the Institute for Budgetary and Socio-Economic Research (IBSER) and do not necessarily reflect the views of USAID or the United States Government. The publication is focused on monitoring the execution of consolidated, state, and local budgets in Ukraine. According to the data, the actual intake of consolidated and state budget revenues continued to climb in January-July 2011, with the state budget receiving Hr 167.3 billion in revenue, which is nearly 26.1% more than the respective 2010 figure. The revenue equals 56.4% of the expected amount for this year. The main driver of this growth in July was an increase in non-tax revenues by 49.9%, which was explained by the remittance by the National Bank of Ukraine of one third of the surplus of the NBU's gross income over expenditures planned for the year, as well as by the sharp growth in revenues for the item "Other own sources of budgetary institutions," which reached Hr 3.1 billion. The tax revenues grew at an expected pace (+44.9%) compared to last year, and on the whole, this was in line with the adjusted target. The highest growth in revenues compared to last year was in the rent and fees for fuel and energy sources (+70.8%), as well as by the enterprise profit tax (+49.8%). The latter increased primarily due to payments by the private sector, which rose 4.4 times. Revenue from other sources also increased: VAT (+26.1%), excise tax (+15.8%), taxes on foreign trade and external transactions (+25.6%) etc. The consolidated budget expenditures over January-July of this year amount to 51.2% of the annual plan, which is 1.3ppt less than last year. Consolidated budget expenditures increased by 5.3% in July year-on-year, with education expenditures decreasing by 7.1% and healthcare by 4.4%. At the same time, 25% more funds were allocated for economic activity, which, among other things, was related to preparations for hosting the Euro 2012 Football Championship. State budget expenditures equalled 51.9% of the annual plan which is 2.0ppt less year-on-year, and 0.7ppt less than in the pre-crisis year 2008. The State budget deficit was financed at Hr 8.6 billion during seven months of 2011 or at 24.4% of the annual target. At the same time, debt was incurred at 68.5% (Hr 60.4 billion), which is 18.3ppt more year-on-year. Also, 43.7% of the borrowings were used for debt repayment. The State budget surplus in July 2011 totaled Hr 2.3 billion (a deficit of Hr 1.2 billion was observed in July of last year). A deficit of Hr 1.7 billion emerged in the Special Fund. Local budget revenue intake was 55.4% of the annual plan during seven months of 2011, which is 1.7ppt more year-on-year. The key feature of revenue execution in July consisted in some slowing-down of growth (see Graph 14). A 23.3% drop in revenues from capital transactions was one of the reasons behind this slowing down (see Graph 31). Also, the cancellation of the tax on owners of motor vehicles and other self-propelled machines and mechanisms as per the Tax Code of Ukraine also had a negative impact on the revenue base of local budgets. Over the first seven months of 2011, local budgets received the fees for the first registration of a vehicle, as well as the tax on owners of motor vehicles assessed for the previous year, which both totaled Hr 561.6 million (70.2% less than in 2010). The expenditures of local budgets increased by 22.0% (see Graph 59). As usual, the majority of local budget expenditures were used for society and culture. In July, however, their amount decreased against the June figure. It should be noted that this situation is observed annually in connection with reduced payroll expenditures in Education due to the summer holiday season. At the same time, a trend continued, which emerged at the outset of the year, of increased expenditures for economic activity, housing and communal services, and environmental protection. The key items showing growth since the beginning of the year included construction (up nearly 3.8 times), agriculture (up 2.2 times), environmental