The Ukrainian parliament supported on December 21 the state budget for 2017, which should help Kyiv secure new funding from the International Monetary Fund (IMF).
The move was suported by 274 lawmakers in the Verkhovna Rada legislative. The pro-Russian Opposition Bloc faction and pro-Western Batkivschyna (Fatherland) party faction headed by former prime minister Yulia Tymoshenko refused to support the bill.
The adoption of the bill alongside the nationalisation of PrivatBank on December 18 improves the Ukrainian government’ chances of securing the next tranche from the IMF's support package agreed in 2015. In September, the IMF approved a $1bn tranche from its credit programme agreed with Ukraine in 2015 after almost a year of delays in allocating funds. Earlier, officials in Kyiv said they expected a further $1.3bn tranche before the year’s end, but are now speaking of 2017.
“After the adoption of the budget, Ukraine has good chances to receive the fourth tranche from the IMF,” the National Bank of Ukraine’s (NBU) deputy governor, Oleh Churiy, told journalists on December 19. “Of course, this would happen next year.”
The Ukrainian government set a deficit target of 3% of GDP in the budget following a 3.7% deficit projected for 2016. Kyiv is aiming to narrow it to 2.3% of GDP in 2019. The cabinet sees revenue growth as the main driver of fiscal consolidation next year, planning to boost revenues by hiking alcohol and tobacco taxes and phasing out VAT breaks for agricultural producers.
The government plans to double the minimum wages in Ukraine to UAH3,200 ($125.7) per month, which is reflected in the 2017 state budget.
Meanwhile, Kyiv experts believe that off-balance-sheet outlays will likely remain moderate as long as the risk of systemic bank failures is contained. The government plans to finance the budget deficit ($2.9bn) and scheduled public debt amortisations ($4.8bn) mostly by new borrowings, looking to raise $3.2bn externally, including $1.8bn of Eurobond issuance.