The Ministry of Finance sends the corrected draft budget for 2019 to the Parliament

The Ministry of Finance has made corrections to the draft state budget for 2019 and submitted it to the Parliament for the second reading. The corrected document respects the conclusions of the Parliament’s budget committee made after the first reading.

The corrected draft budget was approved by the Cabinet of Ministers on November 14.

Preparing the draft budget for 2019, the Ministry of Finance strived to make it well-balanced and realistic. It means that the budget revenues were calculated on the basis of a realistic macro-economic forecast and the budget expenses include the existing public debt. Such a responsible and disciplined budgeting approach is a pre-requisite for macro-economic stability and shall enable Ukraine to lay ground for a sustainable economic growth.

“The timely adoption of this budget – that is duly responsible in fiscal sense – is an important step ensuring the macro-financial stability of the country and paving the way to the further economic growth. We must make steps to ensure our fiscal stability due to the 417 billion hryvnas we will have to spend in 2018 to serve and to re-pay our public debt. Along with that, the key financial law of the country must also deliver up to the needs of Ukrainians concerning social welfare, security and defence as well as take into account the crucial running systemic reforms. The proposed draft budget does provide a balance between all these expectations,” said acting Minister of Finance Oksana Markarova.

The revenues planned in the draft budget for 2019 are equal to UAH 1,026,131.8 million, which includes the revenues of the general fund and the revenues of the special fund equal to UAH 928,507.9 million and UAH 97,623.9 million respectively.

The expenses of the draft budget for 2019 are equal to UAH 1,112,130.0 million, which includes the expenses of the general fund and the expenses of the special fund equal to UAH 1,005,767.5 million and UAH 106,362.4 million respectively.

The maximum deficit of the state budget of Ukraine is set at UAH 89,989.3 million, which includes the maximum deficit of the general fund and the maximum deficit of the special fund equal to UAH 69,617.2 million and UAH 20,372.1 million respectively.

The key points concerning the corrections to the draft budget for the second reading are as follows:

• remarks in the budget conclusions of the Parliament requiring the National Bank to increase its transfers to the state budget by UAH 2 billion;
• review of some of the revenues, especially the revenues from the corporate profit tax (increased by UAH 2.9 billion), due to additionally specified expected corporate profit tax revenues for 2018 as well as the rent fee for the use of sub-soil resources for gas production (increased by UAH 9 billion) due to the increased gas prices for households and heating energy producers as well as the increased own revenues of budget-funded entities (increased by UAH 1.4 billion); 
• the Parliament rejected the rates set in absolute figures for 2019 (draft law No. 9085 was rejected and removed from the agenda) (- UAH 6.6 billion);
• adoption of the new draft law on resources (No. 9260) in the first reading that stipulates amendments to the Tax Code and some other legislative acts aimed to improve tax administration and to review some of the tax and fee rates (+ UAH 5.2 billion);
• inclusion of additional revenues in the draft budget due to the adoption of the Law of Ukraine “On Amendments to the Tax Code of Ukraine Concerning the Excise Tax on Passenger Cars” (No. 8487) (+ UAH 1 billion);
• inclusion of revenues from foreign business entities and organisations according to valid agreements (UAH 2.8 billion for the special fund of the state budget)

The draft state budget with corrections made for the second reading fully sticks to the commitments it was originally based on: security and defence, social welfare, healthcare, education and development of infrastructure.

Defence and security. The planned defence and security expenses for 2019 are equal to UAH 211.9 billion (including government-backed guarantees equal to UAH 5 billion). The respective expenses from the general fund of the state budget amount UAH 194.6 billion and include salaries for military personnel and police forces equal to UAH 111.8 billion, development and purchase of weapons (UAH 30.2 billion) as well as purchase of apartments for military personnel (UAH 1.8 billion). Also, the defence and security expenses from the general fund were increased by UAH 2.2 billion during the preparation of the draft budget for the second reading. These funds will be spent for the disposal of old munition, development of weapons and military equipment, military personnel and other needs.

Social welfare. The Government is committed to provide UAH 167.5 billion for pensions next year. Also, during the preparation of the draft budget for the second reading, it was stipulated that customs revenues (VAT, excise, import duties) from the import of used vehicles with the “EU plate numbers” shall be transferred to the Pension Fund.

Healthcare. As part of the running healthcare reform, the Government intends to increase healthcare spending in 2019. The planned healthcare expenses from the general budget fund, including subventions, are equal to UAH 95.7 billion, which UAH 3.4 billion or 3.7% higher compared to the draft budget adopted in the first reading. They include increased spending for the state investment projects in healthcare (UAH 1,328.4 billion), centralized purchase of medicines for cardio-vascular, brain, oncological and onco-hematological disorders (UAH 626 million), medical treatment of Ukrainian citizens abroad (UAH 300 million), improvement of the material supply of state healthcare facilities (UAH 240 million) etc.

Education. The planned education expenses are equal to UAH 126.9 billion, which is UAH 4.5 billion or 4% higher compared to the draft budget presented for the first reading. During the preparation for the second reading, the following expenses were added: UAH 1,000 million – activities of the President’s Fund to support educational and research programs for students, UAH 1,500 million – subvention to local budgets to improve the quality of education, UAH 150 million – subvention to local budgets for the repair or construction of sport facilities at educational institutions of all grades.

Development of road infrastructure. The draft budget for 2019 stipulates expenses for the construction of new roads equal to UAH 55 billion, including UAH 50.4 billion from the Road Fund and UAH 4.6 billion from international donors.

“I am grateful to the members of Parliament, members of Government and their teams for their hard, but fruitful efforts in preparing the budget for the first and for the second reading. I am well aware that you would like to allocate more funds to each of the listed priorities, but we must stick to our available revenues to be able to reduce the public debt, to keep our macro-economic stability and to continue cooperation with our international partners. We will also continue our efforts to improve the investment climate in Ukraine to reach our key goal, which is accelerating our economic growth compared to our current growth rate of 3%. This will contribute to the prosperity of all our citizens. We are now close to the final line and will continue to work with the Parliament, till the state budget is adopted”, Oksana Markarova said.

The timely adoption of the state budget is one of the conditions for the participation of Ukraine in the new IMF program and for the macro-financial assistance for Ukraine’s budget in the running as well as in the coming year.