The draft law "On the State Budget of Ukraine for 2021" has been registered in the Verkhovna Rada, which will be considered in the second reading. The parliament will have two plenary weeks until the end of the year to consider and adopt the country's main budget.
ElitExpert found out what is written in the budget for 2021.
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In the first reading, the state budget for 2021 was adopted by the Verkhovna Rada on November 5. As expected, numerous amendments will be made to the document before its subsequent consideration in the second reading. The IMF experts also made their own corrections, which were not satisfied with the proposed budget. In particular, because of this, the International Monetary Fund slowed down the issuance of loans to Ukraine.
Revenues of the state budget for the next hour are foreseen at the level of 1 trillion 92 billion hryvnias. The amount of expenses is planned to be much higher than the income and will amount to 1 trillion 328 billion hryvnias. The deficit is set at the level of 236 billion hryvnias, which is 5,5% of GDP - in the first project, this figure was 6%. In just one week, the Cabinet of Ministers found an opportunity to reduce the deficit by more than 34 billion hryvnias. However, reducing the GDP was one of the main demands of the IMF in the budget.
GDP is set at the level of 4,5 trillion hryvnias. Government debt in relation to GDP will be 64,6%. It is planned that the average monthly salary will be 13,6 thousand hryvnias, and consumer inflation will reach 7,3%. The average annual exchange rate is set at 29,1 hryvnias per dollar.
Compared to the budget for 2020, a slight increase in spending on security and defense, education, and medicine is planned, in particular, about 19,5 billion hryvnias are planned to be spent on fighting the coronavirus, of which up to 2,6 billion hryvnias will be spent on vaccinations. However, compared to the first draft, which was adopted in the first reading, the Ministry of Education will not receive UAH 4 billion. At the same time, the bill retained a 30% increase in expenses for the President's Office.
324 billion hryvnias will be spent on social protection of the population, which is 7,5 billion hryvnias more than the expenditures of the current year.
150 billion hryvnias are provided for the development of road infrastructure, which is also 20,7 billion hryvnias more than in 2020. 120 billion hryvnias are laid in the budget to support small and medium-sized businesses. It is planned to raise the minimum wage three times — as of July 1, 2021, it should amount to 6,5 thousand hryvnias. The subsistence minimum (to 2021 hryvnias in December 2393) and the minimum pension (to 2021 hryvnias in December 1934) will increase accordingly.
But, again, if in the first reading of the 2021 state budget it was proposed to allocate financing to the Pension Fund in the amount of 203,819 billion, then by the second reading this funding is proposed to be reduced by 8,5 billion hryvnias to 195,319 billion hryvnias.
How will budget revenues increase?
First of all, due to the increase in taxation: in particular, an additional 1 billion hryvnias should come from the corporate profit tax, and another 240 billion hryvnias from the import duty.
In addition, state-owned enterprises will have to pay 30% of their net profit to the budget instead of 90%. By the second reading, revenues from gambling legalized this year should be credited to the special fund and allocated to the implementation of activities in the field of sports, culture, medicine, education and science under the corresponding budget programs.
Another source of income: the government plans to receive UAH 6 billion from privatization.
Mission Impossible
It gives the impression that the budget was developed without fully understanding the threat of the corona crisis. Thus, an overly optimistic forecast for economic growth is predicted, while already this year there is a decrease in capital investment, an outflow of foreign direct investment, and an actual decrease in lending. The level of projected inflation also does not look very realistic.
In addition, the 2021 budget draft has already taken into account the benefits related to tax changes, but not yet voted by the BP: increase in excise taxes, rent payment, environmental tax.
Doubts are also caused by plans for privatization, since, as long-term experience shows, this is a very unreliable source of income.
Will they accept it at all?
In accordance with the provisions of the budget code, the parliament must adopt the state budget by December 1. As we can see, the deadlines are getting tighter and it is not known whether the parliament will be able to get acquainted with all the amendments. Given that Ukraine is also suffering from a crisis, it is necessary to approach the analysis of the document more carefully.
On the other hand, what if the bill is not adopted? In this case, the state will be able to spend no more than 78% of the volume of expenditures in 2020. The planned increase in the minimum wage will not occur, the financing of budget expenditures in each month cannot exceed 1/12 of the current state budget expenditures, and a significant part of capital expenditures cannot be financed; it is possible to borrow funds only in order to repay the existing state debt.
And, what is no less important, in case of untimely adoption of the 2021 budget, funds for vaccination cannot be allocated, because this year there was no such article in the budget.
