Pynzenyk: Ukraine’s national budget could see Hr 25-30 billion shortfall in 2012

Ukraine’s national budget in 2012 could see a Hr 25-30 billion
shortfall due to overstated revenues targets, according to the head of
the Ukrainian Fund for Reforms Support and former Ukrainian Finance
Minister Viktor Pynzenyk.

“It’s absolutely obvious that the revenues target of the budget will
not be fulfilled. According to my assessment, the budget will be around Hr 25-30 billion short,” he said at a conference organized by Adam
Smith Institute in Kyiv.

The financier said that the direct and hidden deficits of public
finances have grown, and in 2012 could reach 3.8% of GDP, compared to
2.7% in 2011.

“This year the situation is worsening, and the budget will have a
larger deficit compared to the previous year… The practice of off-budget
financing of government expenses has been introduced in Ukraine,”
Pynzenyk said.

He took the monetization of domestic loan bonds issued by the
government for national joint-stock company Naftogaz Ukrainy as an

He also pointed to the large size of government guarantees for loans,
which is also a hidden budget deficit, as liabilities on such loans are
often fulfilled using the funds of taxpayers.

Pynzenyk also mentioned the plan of public joint-stock company State
Food-Grain Corporation of Ukraine to raise a $3 billion
government-secured loan from Export-Import Bank of China.

“Someone takes these products, and in the end the servicing is pushed onto the Ukrainian budget,” he said.

He also expressed alarm at the expanding volume of payments to the
budget by the National Bank of Ukraine (NBU). He said that NBU has paid Hr 12.6 billion to the national budget, while the target for 2012 is
set at Hr 9.6 billion.

“Either the NBU and the government can’t count, or the NBU is
conducting a direct emission, covering expenses with the excess
revenues,” he said.

“One cannot be calm from the point of view of problems with
inflation, despite the fact of having a low inflation indicator, as
there are problems with the deficit of the budget,” he added.

Commenting on the budget prospects, the financier expressed alarm at
the intentions of the authorities to restore the mandatory writing off
of funds from accounts by the tax bodies and pointed at the importance
of passing the national budget for 2013 by the parliament of the new
convocation. He said that during the election campaign lawmakers could
put many populist expenses into the law on the national budget.

“Populism dominates in Ukraine,” he said.

As for the operations of the NBU, Pynzenyk said that there is
non-transparency in distribution of refinancing loans in the conditions
of “money hunger.”

“There’s a political order being carried out here, or resources are
being distributed among structures close to certain people,” he said.

In addition, he described the NBU’s currency interventions to support
the hryvnia as a hidden devaluation: in January-August 2012 NBU’s forex
reserves fell by $1.8 billion.

He said that the growing deficit of the current account of the
balance of payments and difficulties with refinancing of short-term
foreign debt continue to put devaluation pressure on the hryvnia.


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