At its last
session the Government approved the draft law “On Amendments to the Budget Code
of Ukraine” that would implement mid-term budget planning in Ukraine on the
permanent basis and for all levels of the budget system.
What’s it about?
planning is one of the priorities of the Government and the Ministry of Finance
which was also stipulated in the Coalition Agreements, the Mid-Term Action Plan
of the Government till 2020, Memorandum with the IMF and the Strategy for the
Reform of the Public Finance Management System for 2017-2020.
three-year budget planning was launched as a pilot project back in 2017 on the
basis of amendments to the Budget Code. Subsequently, the Ministry of Finance
prepared the state budget for 2018 on the basis of the mid-term budget
resolution which is a key element for the mid-term budget planning.
paved the way for the implementation of the mid-term budget planning on the
prepared amendments to the Budget Code contain a number of innovations
regarding the mid-term planning at the national level:
- implementation of the mid-term Budget Declaration;
- update of the budget calendar;
- extension of the budgetary regulations;
- alignment of the strategic and budget planning.
At the same
time, three-year local financial plans are introduced at the level of local
budgets as a tool of the mid-term budget planning.
the objectives which used to be set in the Key Areas of the Budgetary Policy
(public debt and government-backed debt, key tasks of the fiscal policy etc.),
the Budget Declaration will also contain the following:
spending limit and loan limit as the maximum possible amount of budget funds
which can be received under certain economic conditions;
- spending limits for each main entity entitled to manage
- goals of the main managing entities and their performance
indicators within the set limits;
- assessment of the fiscal risks.
Budget Declaration will be determining the optimal distribution of the state
budget resources between different sectors of the economy which are available
in the mid-term run.
to the Budget Code amendments, the Cabinet of Ministers shall adopt the Budget
Declaration on June 1 at the latest. Also, to deliver the complex vision of the
economic development and the public sector (funded by the state budget), the
Cabinet of Ministers will have to adopt the Budget Declaration and the
macro-economic forecast simultaneously.
law prepared by the Ministry of Finance also introduces new budgetary rules
including the following ones:
- the state budget deficit shall not be higher than 3% of the
- the maximum state budget deficit set by the law on the state
budget shall not exceed the deficit stipulated in the Budget Declaration;
- the maximum volume of state guarantees shall not exceed 3%
of the revenues of the consolidated fund of the state budget;
- also, cases are stipulated when the spending limits and
limits for loans from the state budget are additionally specified.
to the budgetary rules in the course of the budget planning in the mid-term run
will let us effectively achieve the objectives of the state policy and
contribute to the step-by-step development of our economy”, Oleksandr
spending review is introduced as a modern tool of budget analysis which is
aimed at assessing the effectiveness of the state policy in the respective area
as well as effectiveness of budget spending. So far, spending review has not
been used in Ukraine. Its aim is to detect ineffective or irrelevant spending
and to increase the effectiveness of sectoral
policies. The experience of other countries makes it clear that this assessment
helps significantly improve the quality of public services and the effectiveness
of the budget management.
amendments to the Budget Code enhance reporting obligations and responsibility
of the main managing entities for their performance in the respective areas.
the operations of the main entities managing budget funds to become more
transparent and clear for citizens”, the Minister of Finance said.
What’s the benefit?
of these changes will be a consequent and predictable budgetary policy which
will contribute to the financial stability of the country.
predictable and effective budget spending aimed to improve the quality of the
stronger budget discipline and clear rules which will be complied
with by all participant of the budget process for the sake of the common goal –
development of Ukraine.
the control and effective management of the public debt.
the changed focus of the budget planning: from funding public facilities to
delivering public services of high quality.
“This is a
revolutionary step, since the transition from the one-year to three-year
perspective in the budget planning means a systemic change in the budget policy
which ensures a strategic approach to setting priority measures and to the
effective distribution of resources. This decision enormously simplifies
communication with the key stakeholders of the budget process and makes the
negotiations much easier, since all of us have enough time for the detailed
study of the draft budget and preparation of our proposals. Today’s decision
lays ground for the plan of Ukraine’s future economic development and paves the
way for deep systemic reforms. I am grateful to the Prime Minister and all
members of the Government for their support. Now, we also count on the support
of the Parliament”, the Minister of Finance said.