By KYIV. Oct 28 (Interfax-Ukraine) – The National Bank of Ukraine (NBU) predicts a gradual reduction in the budget deficit excluding grants from 25% of GDP in 2022 (16% of GDP including grants) to 19% of GDP in 2023 and 12% of GDP in 2024, according to the inflation report, which the National Bank published on its website on Friday night.
"International financial assistance became the main source of covering significant budgetary needs during the war. In the third quarter, grant funds ($7.8 billion) gained particular importance as a source of income and exceeded 40% of state budget revenues (more than a quarter since the beginning of the year)," the NBU said.
"Another reason for the narrowing of the deficit is the partial abolition of tax breaks and preferences," the central bank added.
In this regard, it improved the forecast for the deficit of the consolidated budget in 2022 to UAH 764 billion from UAH 811 billion in the July forecast.
At the same time, the budget deficit forecast for the end of 2023 worsened to UAH 804 billion from UAH 632 billion in the July forecast, and the budget deficit forecast for the end of 2024 to UAH 591 billion from UAH 499 billion.
The National Bank expects the continuation of the large-scale external support and abandoning emission financing in 2023.
The NBU notes that significant budget spending provides defense capability and support for the population, and a number of tax incentives remain to support businesses.
"A significant budget deficit creates a fiscal impulse that softens the consequences of Russian aggression for the economy in 2022 and lays the conditions for a future recovery," the regulator said.
He clarified that the deficit of the consolidated budget for January-September this year reached a historical record – over UAH 407 billion, and excluding grants – almost UAH 750 billion.
At the same time, the NBU notes the need for a noticeable narrowing of the state budget deficit, starting from 2024, in order to stabilize the public debt.
