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Law on 2016 national budget with IMF-supported 3.7% GDP deficit published

Law on 2016 national budget with IMF-supported 3.7% GDP deficit publishedThe law on the 2016 national budget of Ukraine was published in the Uriadovy Kurier newspaper on Tuesday, and the upper limit for the deficit is retained at the level of UAH 83.69 billion or 3.7% of GDP that was agreed with the International Monetary Fund (IMF).

The deficit is 10.2% higher than the deficit of the 2015 national budget, while in January-November 2015 the deficit of the national budget was only UAH 4.34 billion.

According to the published document, revenue of the 2016 national budget are set at UAH 595.16 billion, which is UAH 78.18 billion or 15.1% more than in the 2015 national budget.

Expenses of the budget were increased by UAH 86.05 billion or 14.8%, to UAH 667.82 billion.

Revenue of the general fund is UAH 562.81 billion (a rise of UAH 71.4 billion or 14.4%) and expenses are UAH 633.51 billion (a rise of UAH 79 billion or 14.2%).

According to the former finance minister, MP from the Petro Poroshenko Bloc Viktor Pynzenyk, revenue of the general fund of the 2015 national budget was UAH 503.8 billion, and the real increase in revenue of the general fund of the 2016 national budget should be UAH 59 billion or 11.7%.

As reported, the budget was passed on the basis of projected GDP growth of 2%, its nominal value of UAH 2.262 trillion and average annual hryvnia exchange rate of UAH 24.10/$1.

The upper limit for direct state debt as of late 2016 will be UAH 1.501 trillion, guaranteed debt – UAH 444.78 billion, while the 2015 national budget contains only the upper limit for direct state debt – UAH 1.394 trillion, and as of late September the total state debt was UAH 1.52 trillion.

The Finance Ministry said that the upper limit towards GDP was set at 86% of GDP.

The 2016 national budget includes the increase of the minimum wage and subsistence wage in two stages – from May 1 by 5% and from December 1 by 7%, and in general – by 12.5%, which equals the projected inflation indicator.

It is planned to increase the subsistence wage from current UAH 1,330 a month to UAH 1,399 from May 1 and UAH 1,469 from December 1, and the minimum wage – from UAH 1,378 a month to UAH 1,450 from May 1 and UAH 1,550 from December 1.

State guarantees could be increased to UAH 28.2 billion from UAH 25 billion this year and these loans could be sent to finance investment projects, the State Mortgage Institution (SMI) and increase the country's defense.

The document also contains the permit for the Cabinet of Ministers to form the stabilization energy fund of $700 million thanks to state guarantees, including purchases of gas by Naftogaz Ukrainy in Europe, while the 2015 budget permitted the government to create the fund of $1 billion.

Revenue from the National Bank of Ukraine (NBU) would fall to UAH 38 billion from UAH 60.5 billion this year, and the financing of the Individuals' Deposit Guarantee via the issue of government bonds will decrease from UAH 20 billion to UAH 16 billion. The bill contains a provision that if the NBU gives consent, its portfolio of government bonds could be restructured, although the document does not provide concrete parameters. The similar provision in the 2015 budget, foreseeing the exchange of government domestic loan bonds held by the NBU for new government bonds with the maturity term of up to 20 years and 5% coupon, did not work.

The 2016 national budget retains the possibility of additional capitalization of banks and Naftogaz Ukrainy via the issue of government bonds, not specifying the sums (UAH 36.5 billion and UAH 29.7 billion respectively).

The document permits the Finance Ministry to continue transactions on exchange of foreign state liabilities, although this concerns the finalization of the debt transaction of 2015.

Additionally, Kyiv city is again permitted to extend payment of 2012 debt for more than one year to settle the debt on bills to refund the difference in the heating tariffs.

The document proposes that articles of some laws on benefits are suspended and the Cabinet is to approve a special procedure for indexation of public income within the financial resources of budgets of all levels and the social insurance fund.

The permit for the Cabinet of Ministers to restructure the debt of UAH 7.64 billion as of January 1, 2016 under court rulings was moved from the 2015 budget.

The published document contains the provision added by the parliamentary budget committee that postpones the beginning of electronic declarations of officials for at least one year, and the government, speaker and some lawmakers have expressed protests about this.

Source: Interfax-Ukraine
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