In January-August 2023, Ukrgasvydobuvannya JSC (UGV) paid almost UAH 16 billion in rent payments, the company’s press service said on Tuesday.
According to the press service, UAH 792.1 million, or 5%, of this amount went to the budgets of the local and regional levels where the company operates.
From January to August 2023, the budgets of Kharkiv and Poltava regions received the largest payments – UAH 385.67 million and UAH 332.72 million, respectively.
The amount of rent payments is calculated in accordance with the sale price of Ukrgasvydobuvannya’s natural gas in favor of Naftogaz of Ukraine.
As reported earlier, Ukrgasvydobuvannya aims to increase natural gas production by 1 bcm in 2023 to 13.5 bcm. In 2022, UGV produced 12.5 bcm of natural gas (commercial), which is 3% less than in 2021.
NJSC Naftogaz of Ukraine owns 100% of Ukrgasvydobuvannya shares.
According to the Ministry of Economy, the average annual exchange rate of the hryvnia to the US dollar in 2023 is expected to be 37.5 UAH/$1 in the draft state budget for 2024, compared to 32.3 UAH/$1 last year.
For 2024, the draft state budget provides for an average annual exchange rate of 41.4 UAH/$1.
As reported, the average annual exchange rate for this year during the adoption of the state budget for 2023 last fall was expected to be 42.2 UAH/$1, and the exchange rate at the end of 2023 was 45.8 UAH/$1.
At the same time, the National Bank has kept the official hryvnia exchange rate fixed at 36.57 UAH/$1 since the end of July 2022. On the cash market, the exchange rate has stabilized at around 38 UAH/$1 this year, while last year it was falling to 39 UAH/$1 and even more.
Over the past week, following the announcement by Finance Minister Sergii Marchenko of the forecast for the average annual exchange rate for 2024, the hryvnia has fallen to 38.3 UAH/$1 on the cash market.
In a September survey, members of the European Business Association predicted an average annual exchange rate of 41 UAH/$1 for 2024, while a year ago they expected 43 UAH/$1 for 2023.
The National Bank of Ukraine (NBU) proposes to raise the corporate income tax rate from 18% to 38% in 2023-2024, NBU Governor Andriy Pyshnyi said.
“Our forecast is that additional budget revenues if the current rate is raised to 38% will total more than UAH 20 billion this year and next year,” he wrote on Facebook.
According to him, such a tax design will have a limited impact on macrofinancial stability and at the same time support Ukraine’s defense capabilities.
The NBU governor, citing the monitoring of the financial condition and the results of the assessment of the banks’ stability, believes that financial institutions are quite capable of making additional payments in the current environment. According to the regulator, the tax rate increase will have a limited impact on lending and deposit rates, given the banks’ sufficient margins.
As reported, the National Bank considers additional taxation of banks to be a justified temporary step in view of the war, seeing financial and legal grounds for this, but proposes to increase the tax rate on banks’ profits instead of taxing net interest income as proposed by MPs.
According to Pyshnyi, this is the version the NBU will discuss with the Parliamentary Committee on Finance, Taxation and Customs Policy in the near future.
He also said that the market participants with whom the central bank communicated were sympathetic to this position.
According to the NBU, the net profit of 64 operating Ukrainian banks in the first seven months of this year amounted to UAH 83.2 billion, while the income tax was UAH 14.4 billion, including UAH 34.4 billion and UAH 7.9 billion for PrivatBank, and UAH 18.8 billion and UAH 0.1 billion for four other state-owned banks.
In late August, MPs submitted to the Rada a bill to tax banks’ net interest income at a rate of 5% in 2024-2026 (in addition to corporate income tax), which could bring in about UAH 10 billion to the state budget next year, according to their estimates. In the first half of 2023, banks’ interest income reached UAH 141 billion, including UAH 73.5 billion from transactions with government securities, and net interest income for the same period amounted to UAH 93.6 billion, up 75% compared to the pre-war period of 2021.
JSC Ukrgasvydobuvannya transferred UAH 13.88 billion of rent payments to the consolidated budget of the country based on the results of its activities from January to August 2023.
“Of this amount, 5%, or UAH 693.9 million, will go to the budgets of local and regional levels in 11 regions where the company produces hydrocarbons,” the company said in a press release.
In particular, Kharkiv region will receive UAH 336.9 million, Poltava region – UAH 292.21 million, Lviv region – UAH 31.8 million, Dnipropetrovs’k region – UAH 18.38 million, and other regions – UAH 14.62 million.
“The amount of rent payments is calculated according to the sale price of Ukrgasvydobuvannya’s natural gas in favor of Naftogaz of Ukraine.
The National Bank of Ukraine in its August inflation report worsened its forecast for the country’s 2024 consolidated budget deficit including grants to UAH 1,281 billion, or 16.8% of GDP, down from UAH 811 billion, or 10.5% of GDP, in its April report.
“Deficits are expected to be higher than in the previous forecast, primarily due to the longer duration of security risks, and therefore the need for significant spending on the security and defense sector. Taking this into account, the amount of expected international assistance to finance other expenditures has been increased,” the NBU points out.
In the new report, the forecast of the consolidated budget deficit including grants in 2025 is raised to UAH 883 billion, or 10.0% of GDP, up from UAH 577 billion, or 6.5% of GDP in the April report.
Last year, as the NBU recalled, the deficit of the consolidated budget including grants amounted to UAH 845 billion, or 16.3% of GDP. In the second quarter of this year, it widened to more than UAH 233 billion, and excluding grants in revenue – to UAH 369 billion, or more than 24% of GDP.
“In 2023, the budget deficit excluding grants in revenue is expected to be at the level of the previous year – more than 26.3% of GDP. In the future, due to the increase in revenues, it will narrow to almost 20% of GDP in 2024 and 12% of GDP in 2025 excluding revenue grants,” the National Bank summarized.
It specified that it expects grants to decline from 9.3% of GDP last year to 6.5% of GDP this year, 2.9% of GDP next year and 1.8% of GDP in 2025.
“Given the significant budget deficits for several consecutive years and their financing mainly by debt, as well as the reduction of grant support in the medium term, the debt will approach 100% of GDP,” the National Bank said. It explained that it increased the debt-to-GDP ratio in this forecast compared to the previous one due to the revision of assumptions about the size of deficits upward and grant support downward in 2024-2025.
In particular, the NBU expects government debt to rise from 78.4% of GDP to 84.6% of GDP this year, to 96.6% of GDP next year and to 98.2% of GDP in 2025.
“At the same time, such a high level of debt will have a relatively moderate pressure on the budget in the coming years, primarily due to the receipt of loan funds on preferential terms – at low rates and with a deferred schedule of principal payments,” the NBU believes.
Ukraine’s state budget on Thursday received a $1.5 billion concessional loan through the World Bank’s Trust Fund mechanism under guarantees from the Japanese government, the Finance Ministry said.
“The raised funding will be used to restore the economy and strengthen social protection of the population,” the release quoted Finance Minister Serhiy Marchenko as saying, thanking the WB and Japan for the allocation of funds.
The Finance Ministry recalled that since the beginning of Russia’s full-scale invasion, Ukraine has received more than $581 million in concessional financing from the Japanese government through the Japan International Development Agency (JICA).
“This year, the Japanese government is expected to provide another $2 billion in direct budget support through the World Bank Trust Fund,” the ministry added.
As previously indicated by the Ministry of Finance, as of July 21 this year, Ukraine’s state budget received funding from international partners in the amount of $23.6 billion, compared to $32.1 billion last year, with a need for this year of about $42 billion.
Since then, the budget has also received EUR1.5bn of the sixth tranche of EU macrofinancial aid.
