Statement of the Ministry of Finance on Ukrainian trade unions' requests related to an immediate increase of social expenditures


Yesterday the trade unions of Ukraine made urgent proposals to the Verkhovna Rada of Ukraine and to the Government regarding the necessity of an immediate increase in social spending. The Ministry of Finance understands the importance of supporting the citizens of Ukraine during such a hard time and that is why we aim to index social payments. In the meantime, the Ministry of Finance will be responsible to its citizens and will only increase expenditures when there are appropriate financial resources.

Fulfillment of the requests announced by the trade unions will require substantial additional expenditures from the budget and social funds, as well as unexpected budget losses, totaling ₴ 42 billion.

For the time being, there are no such funds in the state budget to allow for a significant increase in social payments. Increase of budget revenue in the beginning of the current year was only a result of the rapid national currency devaluation in February 2015 and was only temporary. It no longer influences revenues to the state budget.

At the same time, the Ministry of Finance must accumulate ₴ 24,4 billion in order to have funds, in autumn, to finance subsidies for the compensation of tariff increases to the population. The amount of subsidies provided for the population is projected to be at record levels for the country.

Also, one of the priorities of the Ministry of Finance is to ensure sufficient defense potential of our country. In May, the Ministry of Finance addressed 10 Departments, which are in charge of the defense and law enforcement of Ukraine, with a request to increase total financing for over ₴ 17 billion hryvnias.

And the lastly, the Ministry of Finance has to find the funds to finance the changes to the legislation that have been already passed by the Verkhovna Rada of Ukraine and which require additional financing in the current year. In particular, the Law “On Ensuring the right to a fair trial”, which launches juridical reform in Ukraine.

The Ministry of Finance will do everything possible to find an opportunity to finance such needs as a provision of defense capacity of our country and prompt increase of social standards. But it will be done in a way that maintains the balance of the state budget of the country because, otherwise, it will lead to increased deficit of the state budget from the planned ₴ 78,5 billion to ₴ 117,5 billion . This change is equivalent to going from 4,1 % of the GDP to 6,3 % .

As the deficit of the state budget becomes higher, the inflation pressure on the economy increases proportionally. It will result in further devaluation of the Ukrainianhryvnia and, therefore, will lead to a decrease of real pensions, salaries etc. That is why increasing the budget expenditures for certain categories of population, without justification, will strike a blow to the welfare of all citizens of our country.

Simultaneously, the Ministry of Finance appeals to the deputies to support the initiative of the Ministry of Finance to reduce all administrative expenditures during preparation and adoption of the 2016 state budget. It will free up funds from the budget which are necessary for a much needed increase in social expenditures and will not unbalance the system of the state finance.

With this aim, the Ministry of Finance is actively working on the restructuring of state debt, as debt service result in more than 5% of Ukraine’s GDP. The restructuring is not only to reduce pressure on Ukraine’s payment balance, totaling $15,3 billion during 2015-2018, but will also significantly reduce state budget expenditures on state debt service. The restructuring of state debt will result in a reallocation of resources toward other important priorities.

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