Liquidity crunch freezes UAH 18 bln VAT refunds - minister

Finance Minister Serhiy Marchenko has disclosed a state budget liquidity crisis in October, resulting in the suspension of various spending and VAT refunds. Defense spending, pensions, wages, and social benefits are the only areas being financed, while other expenditures have been either prioritized or halted until the single treasury account is restored.

UAH 39 billion worth of spending has been delayed until the issue is resolved, alongside UAH 46 billion sitting unprocessed in the treasury. The latter includes expenses such as road repairs, maintenance, development of administrative centers, penal institution upkeep, school bus purchases, housing repairs, heating season preparations, and backup power procurement.

Additionally, VAT refunds worth UAH 18 billion to taxpayers have also been suspended due to the liquidity crisis. The government is actively seeking domestic resources and has intensified efforts by a working group on de-shadowing the economy. The group's work aims to propose solutions to issues like the artificial splitting of businesses, illegal tobacco production and sale, labor market misuse, and humanitarian aid misuse.

Marchenko also mentioned that the Finance Ministry has significantly increased borrowing on the domestic market, fulfilling the annual borrowing plan almost entirely. However, the ministry is further increasing borrowing to ensure adequate liquidity, primarily for social payments and security and defense sector payments. Despite this, the offering of domestic government bonds at primary auctions on October 13 has been reduced to UAH 2 billion, down from UAH 5 billion the previous week, when the ministry managed to sell UAH 2.2 billion of bonds.