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State budget execution in April: Why inflation cannot but increase

Inflation in Ukraine: Trends

Inflation in Ukraine: Trends

The Ministry of Finance has published data on the state budget execution in January — April 2022. The key figures are as follows:

  • budget revenues in April — 76.2 billion UAH;
  • income in January — April — 412.5 billion UAH;
  • budget expenditures in January — April — 558 billion UAH;
  • external borrowings since the beginning of the year — 123 billion UAH.

Analyzing the data of the Ministry of Finance, MP Yaroslav Zhelezniak noted that in the fully military months (March and April), expenses amounted to approximately 170 billion UAH for everything. Or $5 billion — as the Ministry of Finance had said.

Monthly expenses will increase, the MP believes, since there is inflation, an increase in the number of people in need of social support, etc.

Since revenues are only 76 billion UAH, it turns out that about $3 billion of external assistance is needed per month.

Since the outbreak of the war, the budget (except for military aid) has obtained only $4 billion. That is, $2 billion a month.

Where does the missing $1 billion come from? "We are minting it," Zhelezniak believes. Not literally, but 70 billion UAH has already been spent by the NBU on purchasing military bonds.

"This means that inflation will only increase, and prices will rise," concludes the MP.

"That's the whole mathematics. Therefore, when you hear from populists about another need to extend tax breaks, etc., then ask as well how they want to cover the lack of this billion," Zhelezniak sums up.

More about inflation. Inflation in annual terms in April may increase to 15.9% from 13.7% in March, the Governor of the National Bank Kyrylo Shevchenko believes.

"During wartime, it is impossible to avoid rising prices. At the end of the year, inflation may exceed 20%. This is a significant level of price increase, but a controlled one. And such figures are incomparable with 2015, when in some months inflation reached 60%," he wrote in a column for NV.Business.

The National Bank Governor noted that so far market mechanisms are not very effective, therefore, the regulator will constrain price increase by fixing the exchange rate and maintaining part of the restrictions.

Ukraine's international reserves as of the beginning of May amounted to $26.8 billion compared to $28.1 billion as of April 1.

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