The Parliament of Ukraine Approved the Draft State Budget for 2021
On December 15, 2020 the Parliament of Ukraine approved the draft Law "On the State Budget of Ukraine for 2021" in the second reading and as a whole.
“This year, the preparation of the state budget for 2021 by the Ministry of Finance took place in a fundamentally different economic situation in Ukraine and the world. The starting positions were the budget deficit of 7.5% of GDP, underperformance of the revenue annual plan of UAH 44 billion, the outbreak of the pandemic and the coronavirus crisis. When finalizing the document for the second reading, it was important for us to preserve the priorities defined by the President and the Government, which were supported by MPs, and at the same time to reduce the state budget deficit, following the principles of balance and feasibility," noted the Minister of Finance, Sergii Marchenko.
The Ministry of Finance has carefully considered about 2.5 thousand amendments of MPs. The Ministry of Finance has taken into account the majority of proposals submitted by the parliamentarians, taking into consideration expenditure priorities and possibilities of the revenue part of the budget. In total, the Budget Conclusions take into account parliamentary initiatives of UAH 14 billion.
The budget deficit of the general government sector to GDP was reduced from 5.8% to 5.24 %, while the state budget deficit - from 6% to 5.5% and amounts to UAH 246.6 billion. The difference between the first and second readings is UAH 23.7 billion.
It should be noted, that the State Budget for 2020 provided a deficit of 7.5% - this figure was reduced by 2% (by UAH 52 billion).
In addition, a gradual reduction of the budget deficit is planned in the medium term perspective: 4.5% of GDP - in 2022 and 3.5% of GDP - in 2023.
"We continue to move within the IMF program: the budget-2021 parameters coincide with the estimates of the Fund's experts. We have maintained the trust and support of international partners. Evidence of this is the EUR 600 million of macro-financial assistance from the EU. Recently, we have signed the agreement with the IBRD for USD 300 million to finance measures to overcome the pandemic. Also, we have announced the pricing of another public Eurobond transaction. The implied yield of 6.20% is the lowest yield in the history of Ukraine’s public USD Eurobond offerings! The demand of foreign investors for Ukrainian domestic government bonds is also returning,” Sergii Marchenko stressed.
According to him, this indicates that the country is following the chosen course of maintaining financial stability and economic growth.
"We proved this when we accumulated the necessary funds in the spring under critical conditions and were able to respond to Covid-challenges, and make up the budget revenue gap in six months," the Minister of Finance noted.
It should be recalled that due to the optimization and improving the efficiency of the State Tax Service, improvement of tax administration and the elimination of VAT fraud schemes, the gap in budget revenues of UAH 44 billion has been completely closed. Currently, the State Tax Service has already fulfilled ahead of schedule and even overperformed the annual plan for state budget revenues by 10%.
In comparison with the first reading, the revenues of the draft state budget for 2021 are increased by UAH 20.9 billion and are projected at UAH 1,092 billion. These are the real funds that the state plans to receive next year without raising taxes or any pressure on the business.
The expenditures of the state budget are envisaged at UAH 1,328 billion, which takes into account the need to finance all the priority needs of the state, in particular:
o purchase of vaccines from COVID-19;
o an increase in the minimum wage;
o indexation of pensions and benefit payments for pensioners aged 75+;
o raising the salaries of doctors by 30% and teachers by 25%;
o development of quality education;
o decent support to the sphere of culture, sports and digitalization;
o development of the Program "Affordable Loans 5-7-9%" and portfolio guarantees;
o support for agriculture and regional development.
"Balanced budget expenditures are the guarantee of the state's fair treatment to each of its citizens. Every hryvnia of taxpayers will be used effectively and for its intended purpose," emphasized Sergii Marchenko.