Ukraine’s national budget could see UAH 25-30 b shortfall in 2012, says ex …


Ukraine’s national budget in 2012 could see a UAH 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 UAH 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 example.

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 UAH 12.6 billion to the national budget, while the target for 2012 is set at UAH 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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