On September 15, the Government adopted the draft of the state budget for 2017 and passed it to the Parliament.
The realistic and accountable draft budget was delivered to the Parliament on the basis of the transparent budget process.
The key principle which the Government followed when elaborating the draft budget for 2017 was as follows: the budget must be realistic with all expenses covered by equal revenues.
During the budget process the Ministry of Finance involved external experts to check the calculations. That made the budget process really transparent for the first time.
This year, the Ministry of Finance has changed the key approaches to the budget process – revenues and available financial capacities were given top priority, whereas the expenses played a secondary role.
Also, a three-year budget planning has been implemented. A draft budget for 2018 and 2019 was elaborated and a plan for the economic development of Ukraine in the coming years was issued. Predictable budget policy and planning comprising several years shall make it possible to pursue systemic and comprehensive reforms, to make the country more attractive for investors and to improve the business climate. The new budget has clear priorities which are completely covered by the available financial capacities. The priorities were based not on the available funding, but on the relevance of reforms and development for the respective sectors.
The key areas for systemic reforms set in the budget for 2017 are as follows:
Improvement of the quality of public services: better quality of education, healthcare and the services provided by state authorities by increasing salaries to enhance professionalism;
Protection of state interests: increased defense and diplomacy budgets for the comprehensive protection of national interests;
Improvement of the social welfare: targeted support to citizens through preferences and subsidies for the financially most vulnerable groups, increase of the minimal wage;
Development of the real economy sector: support to the strategic sectors of the economy (agriculture, motorways, energy efficiency);
Strengthening the regions: support to the local budgets and regional investment projects in the course of the decentralization reform;
Culture: development of the Ukrainian cinema production, hosting the Eurovision song contest and commemorating historical events (Holodomor museum and memorial of the Heavenly Hundred).
Key facts about the state budget for 2017:
• Limits for pensions or monthly lifelong support payments which are free from the income tax and military charge shall be changed from 3 minimal wages (4800 hryvnas in 2017) to 10 living wages for persons incapable to work (12470 hryvnas);
• The tax burden on citizens shall be reduced by granting a social tax exemption equal to 50% of the minimum wage for persons capable to work (800 hryvnas). This concerns all tax payers, provided that their income is not above 1.4 of the living wage for persons capable to work (2240 hryvnas);
• Starting from January 1, 2017, the rent fee for gas production shall be reduced from 50% to 29% for gas fields located up to 5000 meters under the ground which are used to supply households and heating companies as well as for the increase of production;
• To slow down the growth of the state debt and the debt burden on the state budget, the state budget deficit threshold for 2017 is proposed to be set at 3% of the GDP (77.5 billion hryvnas) compared to 3.7% of the GDP (83.7 billion hryvnas) set for 2016.
• The minimal wage and the living wage shall be increased by 10.1% which is 2% ahead of the inflation rate;
• Pensions and welfare payments shall be increased in line with the higher living wage;
• Salaries for teachers shall be increased (additional 4.5 billion hryvnas shall be provided);
• All obligations of the state to its creditors shall be met;
• 129 billion hryvnas shall be spent on defense (5% of the GDP);
• Additional 2 billion hryvnas (total amount: approx. 6 billion hryvnas) shall be provided to purchase medicines and medical goods including those for the treatment of cancer, AIDS and tuberculosis;
• Additional 75 million hryvnas shall be provided to purchase hearing aids for children;
• Additional 350 million hryvnas shall be envisaged to speed up settlement of debts to citizens acknowledged by courts and guaranteed by the state;
• Hosting of the Eurovision song contest (455.7 million hryvnas);
• Additional 1 billion hryvnas for the Ministry of Foreign Affairs to ensure the protection of the national interests and interests of Ukrainian citizens abroad, implementation of the European integration of Ukraine and improvement of the global image of Ukraine;
• Ensuring the operation of the Motorway Fund (14.2 billion hryvnas);
• The Energy Efficiency Fund shall be focused on setting up and implementing financial tools to motivate a large-scale and fast energy saving by households;
• Support to agricultural companies;
• 1.8 billion hryvnas shall be provided to the coal-mining industry including 0.8 billion hryvnas for the restructuring of the coal-mining companies and 1 billion hryvnas to support the operation of the state coal enterprises in the course of the reform in the coal-mining industry.