On March 28, the Government approved the report on the execution of the Law of Ukraine “On the State Budget for 2017” presented by Minister of Finance Oleksandr Danyliuk.
As the Minister of Finance pointed out, it is for the first time in many years that the budget for 2017 was prepared and adopted on time and within all timelines set by the law. That made it possible to have a proper discussion with the member of the Government and Parliament as well as with the other stakeholders of the budget process.
This discussion process was much more transparent, since all parties had enough time to study the draft budget thoroughly and to make their proposals.
The state budget for 2017 covered all key reforms in the country and ensured the effective use of public funds. In 2017, the Government pursued a well-balanced spending policy to finance the priority needs of the country including:
Defense and security;
Re-payment of debts;
Increasing social welfare standards;
Preferences and subsidies to citizens related to the increased housing utility tariffs etc.
Also, the state budget for 2017 supported the increase of salaries, the pension reform and the increase of pensions, repair of the road network, increase of the salaries for teachers as well as covered the purchase of medicines in the requested amount for the first time.
The deficit of the state budget in 2017 was kept within the limits agreed with the IMF and set by law. The actual deficit of the state budget in 2017 was equal to UAH 47.9 bn, which is 1.6% of the GDP compared to the limit of 2.7% of the GDP.
For the first time since 2011, the correlation between the state debt and government-backed debt and the GDP went down compared to the previous year – from 81% in the end of 2016 to almost 72% in the end of 2017. It means that this correlation is getting close to the “safe” 60% correlation between the state and government-backed debt and the GDP. The key factor contributing to this development is the low budget deficit resulting in a lower demand for loans.
Such results were achieved due to the new approaches implemented in the budget planning. They include clear mid-term targeting and budget regulations including the deficit of the state budget.
The positive changes in the correlation between the said debts and the GDP also result from the new approaches in public debt management including active operations with the public debt implemented by the Ministry of Finance which are aimed to reduce the share of debts nominated in hard currency and to make the schedule of debt payments more stable.
The key results of the state budget in 2017 are as follows:
State budget deficit – lower than 2% of the GDP;
Security and defense spending – 4.8% of the GDP;
Significant increase of the minimum wage, living wage and other social welfare transfers;
Implementation of the pension reform and review of pensions;
Support for citizens due to the increased gas and heating tariffs;
Resumption of public capital investments.
In general, the tax and budget policy of the Government in 2017 ensured a timely reaction to new challenges, helped re-gain financial stability, ensured funding for defense and social welfare as well as enabled important steps in the tax reform and budgetary decentralization.