Budget deficit continues to widen; European Union mulls 500 million euro loanl; Steel output jumps in October.
Budget deficit continues to widen
Ukraine’s consolidated budget, which includes the central and local budgets, ran a deficit of Hr 25 billion in January-September, up sharply from a gap of Hr 17 billion gap in the first eight months of the year. Consolidated revenues declined 11 percent to Hr 195 billion over the period, undermined by the economic downturn, but spending rose 6 percent to Hr 220 billion as the government struggled to keep social payments on an upward trend. Factoring in scheduled external debt redemptions ($1.6 billion in January-September) as well as the funding the state Pension Fund and oil and gas monopoly Naftogaz Ukraine required to cover their respective deficits, the government likely spent virtually all of $4.8 billion received from the International Monetary Fund this year specifically to finance the budget deficit.
European Union mulls 500 million euro loan
The European Commission, the European Union’s executive arm, recommended disbursement of a 500 million euro loan to Ukraine to help the country implement the reforms required by its $16.5 billion lending program with the IMF. The loan is subject to approval by the EU Council, the union’s main decision-making body. The loan is planned to be provided in two installments and is explicitly conditioned on the IMF program for Ukraine remaining intact. However, given Ukraine’s current difficulties in talks with the IMF – President Victor Yushchenko defied the Fund in approving populist wage and pension increases – the country is likely to receive the EU loan only next year.
Steel output jumps in October
Ukraine’s October crude steel production stood at 2.7 million tons (Mt), up 14 percent compared to September and 44 percent higher than in October 2008 when the industry suffered a sharp downturn. Despite sluggish foreign demand, local steelmakers benefited from improved raw material supplies as well as from customer orders left over from September. ArcelorMittal Kryviy Rih, the domestic subsidiary of top world steel producer ArcelorMittal, led the industry last month, almost doubling output to 0.5 Mt compared to September. In January-October steel production in Ukraine totaled 23.4 Mt, still down 28 percent compared to the same period in 2008.
