Business met with the Minister of Finance of Ukraine

29/ 09/ 2022

Yesterday, the European Business Association held a meeting with Serhii Marchenko, the Minister of Finance of Ukraine. We talked about the parameters of next years budget, macroeconomic stability, optimization of expenditures on central authorities, and possible tax changes. It is expected that exports, logistics potential, etc. will recover next year. Arithmetic growth of the economy is expected at the level of 4.6% compared to this year. According to the draft budget, the revenues to the general budget are predicted to be UAH 64 billion lower than the one for this year. Expenditure items will be quite conservative, and their reduction is planned at the level of UAH 273 billion, and optimization will take place in all ministries and departments, particularly, controlling bodies, such as the tax service. Next year, the state will spend UAH 12 billion less on the maintenance of central authorities. At the same time, the military budget will amount to 1 trillion 141 billion UAH. Expenditures on security and defense will amount to 17.8%. Moreover, UAH 18 billion will be allocated to the program of affordable loans 5-7-9% as it will be extended. Also, it is planned to provide grants for micro and medium-sized businesses in the amount of 1 billion 370 million. The distribution of grants will be carried out through the State Employment Fund. Besides, the draft budget envisages 24 billion UAH as additional compensation for losses caused by the russian military aggression on local budgets. Nevertheless, it is assumed that next years budget deficit will be of 38 billion USD, although this is less than this years (thus, the monthly deficit is about 5 billion USD at the moment). The Minister of Finance expects that next years draft budget will be adopted according to a shortened procedure so that the final budget will be ready in October, which will enable a substantive discussion with international partners. Along with the defense, next year the Government will prioritize social security (payment of pensions, support of internally displaced persons, etc.), education, and medicine (rehabilitation services, psychological assistance services). By the end of this year, it is still expected to attract about 17 billion dollars from international partners. Accordingly, the exchange rate expectations of the Minister of Finance for this year are quite optimistic. Regarding the aid from international partners, it was agreed that such aid should not be used for military needs. Respectively, they have to be covered by taxes and internal borrowing. In general, this year Ukraine will receive up to 50% of grant funds from all aid sources, the rest are preferential loans. Meanwhile, Ukraine is currently actively working to ensure further cooperation with the IMF for next year. Among other things, we also talked about the “10-10-10” tax reform initiative which the Ministry of Finance is not ready to comment now. Also, we discussed the VAT refunds and the taxation system in general. On behalf of the European Business Association, we sincerely thank Serhii Marchenko for the meeting and we really hope for a continuation of the dialogue!

Yesterday, the European Business Association held a meeting with Serhii Marchenko, the Minister of Finance of Ukraine. We talked about the parameters of next year’s budget, macroeconomic stability, optimization of expenditures on central authorities, and possible tax changes.

It is expected that exports, logistics potential, etc. will recover next year. Arithmetic growth of the economy is expected at the level of 4.6% compared to this year.

According to the draft budget, the revenues to the general budget are predicted to be UAH 64 billion lower than the one for this year. Expenditure items will be quite conservative, and their reduction is planned at the level of UAH 273 billion, and optimization will take place in all ministries and departments, particularly, controlling bodies, such as the tax service. Next year, the state will spend UAH 12 billion less on the maintenance of central authorities. At the same time, the military budget will amount to 1 trillion 141 billion UAH. Expenditures on security and defense will amount to 17.8%. Moreover, UAH 18 billion will be allocated to the program of affordable loans 5-7-9% as it will be extended. Also, it is planned to provide grants for micro and medium-sized businesses in the amount of 1 billion 370 million. The distribution of grants will be carried out through the State Employment Fund. Besides, the draft budget envisages 24 billion UAH as additional compensation for losses caused by the russian military aggression on local budgets. Nevertheless, it is assumed that next year’s budget deficit will be of 38 billion USD, although this is less than this year’s (thus, the monthly deficit is about 5 billion USD at the moment). The Minister of Finance expects that next year’s draft budget will be adopted according to a shortened procedure so that the final budget will be ready in October, which will enable a substantive discussion with international partners.

Along with the defense, next year the Government will prioritize social security (payment of pensions, support of internally displaced persons, etc.), education, and medicine (rehabilitation services, psychological assistance services).

By the end of this year, it is still expected to attract about 17 billion dollars from international partners. Accordingly, the exchange rate expectations of the Minister of Finance for this year are quite optimistic.

Regarding the aid from international partners, it was agreed that such aid should not be used for military needs. Respectively, they have to be covered by taxes and internal borrowing.

In general, this year Ukraine will receive up to 50% of grant funds from all aid sources, the rest are preferential loans. Meanwhile, Ukraine is currently actively working to ensure further cooperation with the IMF for next year.

Among other things, we also talked about the “10-10-10” tax reform initiative which the Ministry of Finance is not ready to comment now. Also, we discussed the VAT refunds and the taxation system in general.

On behalf of the European Business Association, we sincerely thank Serhii Marchenko for the meeting and we really hope for a continuation of the dialogue!