Presidential elections scheduled on Oct 25

Today Ukrainian Parliament has set a date for regular Presidential elections. Overwhelming majority of 401 PDs (out of 450) voted for Presidential elections to be held on Oct 25 2009. Earlier proposals of elections date ranged from Oct 09 (5 years since 2004 elections) to Jan 10 (5 years since inauguration).

Our view: Rada’s decision was most likely motivated by self-defense against possible early parliamentary elections. Recent appeal of the President to the Constitutional Court contained a norm which could give the President the right to disband Rada. After today’s decision the President is de-facto unable to take any steps regarding Rada as the law places 6 month moratorium on parliamentary elections in the run-up to the Presidential elections (additionally, 2 months are needed to call for early elections).

Should elections be held in Oct 09, it could strongly support ailing Ukrainian economy, especially services sector and trade which are traditionally sensitive to funds inflow over election period. On the flip side we expect the bulk of negative headlines on Ukraine as election campaign is promising to be fierce.

Ukrainian parliament found a way to patch (at least in part) fiscal imbalances of the state budget and passed bills on increase of excise duties on tobacco, alcohol and diesel fuel. According to Deputy Finance Minister changes in excise taxes on alcohol and diesel fuel would add UAH1.3 bn into public purse this year. Excise tax on tobacco goods was doubled from UAH 47 to UAH 100 per 1 thd cigarettes effective from May 1, 2009. The step was very welcomed by IMF representatives; now they are waiting for Pension Fund balancing.

Our view: Budget revenue from all excise taxes in 2008 were UAH 10 bn, in 2009 govt has planned to receive UAH19 bn. If we assume that revenues from excise tax on tobacco state about 30% of total excise revenues, then in the best case Ukraine would get additional UAH6.4 bn of budget revenues, thus total receipts from excises would now make up UAH26.7 bn.