The plan to finance the increase in state budget expenditures in 2024 by UAH 216 billion at the expense of the domestic government bond market (OVDP) seems unlikely, because it will require a very sharp increase in the volume of sales at primary auctions, but there are revenues from a possible 50% income tax in reserve banks, believes the head of the budget committee of the Verkhovna Rada, Roksolana Pidlas.
“We calculated that for its (IF-U plan) implementation, the Ministry of Finance should place UAH 27 billion at each auction by the end of the year. I think this is unlikely, because the average for all auctions, according to my calculations, is UAH 10.3 billion, but the last four auctions raised UAH 20.5 billion, UAH 20.3 billion, UAH 13.8 and 17 8 billion UAH, respectively,” she said in an exclusive interview with the Interfax-Ukraine agency.
Podlasa reminded that after the adoption of the law No. 11417 on the increase of the expenditures of the state budget-2024 by almost UAH 500 billion for security and defense, the internal borrowing plan was increased to UAH 742 billion.
At the same time, the head of the committee noted that the National Bank of Ukraine helped in this matter thanks to its latest decisions on increasing the standard of mandatory reserves and the limit of coverage of reserves by government bonds.
“Plus, the Ministry of Finance constantly consults with banks and actually asks them to buy OVDP bonds. It all helps, but, again, I don’t think the plan will be 100% implemented,” she summed up.
At the same time, Pidlasa specified that the norm on increasing the bank profit tax this year from 25% to 50%, adopted in the first reading of draft law No. 11416-d, was not taken into account when calculating revenues in the amendments to the 2024 state budget.
According to her, UAH 28 billion of additional revenues from such an increase can compensate for the underperformance of the OVDP placement plan.
The head of the budget committee also agreed with the opinion of the Ministry of Finance that the resource of the OVDP market for further financing of the state budget after the end of 2024 is practically exhausted, and the main source remains external financing.
As reported, the amendments to the 2024 state budget adopted in mid-September provide for additional financing of the deficit by the end of the year by UAH 216 billion at the expense of the OVDP market: the volume of attraction has been increased to UAH 742.02 billion, with repayments of UAH 386.01 billion.
The government project of the state budget-2025 provides for the placement of OVDP bonds for UAH 579.22 billion with a repayment volume of UAH 561.98 billion.
That is, the plan to finance the deficit at the expense of the OVDP in 2025 was reduced to UAH 17.2 billion from UAH 356 billion in 2024. At the same time, it is planned to attract $38.4 billion in external financing, financing the state budget deficit by UAH 1 trillion 875.87 billion.
According to the calculations of the National Bank, the increase in the mandatory reserve ratio from October 11 by 5 percentage points (p.p.) together with the increase in the limit for the formation of their OVDPs from 50% to 60% creates a potential net demand from banks for the purchase of OVDPs in the amount about UAH 130 billion.
