Budget 2015 Ukraine – coming soon (before 2016 anyway)

December 30, 2014

Last night, and in to the early hours of this morning, saw the RADA debate and then pass the budget for 2015 – sort of.

To be blunt, quite what it passed is somewhat fuzzy.  Numerous amendments were agreed in the session, thus what was submitted on paper, is not what was passed.  What passed is seemingly based upon little more than verbal agreement.  How substantially this submitted document will have changed when the amended budget is eventually published remains to be seen.

Indeed, Prime Minister Yatseniuk stated after the vote on the budget – “To be fair, this budget, as well as all the previous budgets adopted in these walls, is far from being perfect, this is why we’ve included a requirement to conduct a mandatory review of it until Feb. 15” – inferring a great deal can still change, even regarding the verbally agreed amendments that saw the budget pass.

Thus whilst the law requiring an annual budget be passed prior to the New Year (budgetary period) may have been satisfied – technically – what has passed is not set in stone, is subject to a revision process until 15th February, and may yet contain numerous verbally agreed amendments that allow the budget to pass – or not.

All somewhat underhand and/or a shambles.  Ukrainians will not know the actual content of the 2015 budget until 15th February at the earliest it appears.

What will probably not change are the foundational assumptions of the budget.  It foresees the country’s GDP at minus 4.3%, nominal GDP at UAH 1.721 trillion, inflation at 13.1%, and the exchange rate at UAH 17 per U.S.$.  Wishful thinking perhaps – but a peg in the ground nonetheless.

Whatever the case, whatever passed through the RADA, has resulted in the IMF very swiftly announcing that its Mission to Ukraine will return on 8th January, remaining until the month end.  “The IMF is moving expeditiously to continue discussions with the Ukrainian authorities on the IMF-supported economic reform program aiming to stabilize the Ukrainian economy and restore sustainable growth.”

Plenty of time to influence the 2015 budget that is – but actually isn’t – prior to 15th February window, when tinkering, adjusting, and changing what will actually become the budget, closes.  Indeed the first quarter of the budgetary year may have passed prior to there actually being a defined budget adopted.

Particularly grim, is the (perhaps little more than notional at present) recognition that the Naftogaz Ukraine deficit could reach UAH 31.5 billion in 2015 – a painful line item in every Ukrainian budget.

As has been written here many, many times over the years – it is time to kill off this particularly odious and toxic beast.  This State behemoth has to be butchered.  It’s breakup is almost a prerequisite to supporting the State budget – not withstanding it is a font from which a great deal of corruption flows.  If there is an expectation that in meeting EU energy regulations, that the corruption pervasive within the Ukrainian energy sector, and that hangs heavily around Naftogaz, will somehow be miraculously cured without the Naftogaz sacrifice at the alter of necessity, then there are some especially deluded policymakers.  Chopping it up into business units that can be either privatised or retained, or both, results in a more manageable, more transparent, more “issue insulated” structures.

Whatever the case, it appears that entering into 2015, Ukraine has a budget that is – but isn’t.

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