Draft 2017 State Budget Sent to Verkhovna Rada

Draft 2017 State Budget Sent to Verkhovna Rada
16 September 2016
On September the 15th, the Government approved a draft state budget for the year 2017 and submitted it to Parliament. However, the document has not been made public yet. According to the Ministry of Finance of Ukraine, the 2017 budget has the following key areas of systemic reforms:
Improving the quality of public services: Improving the quality of education, healthcare, and public authorities through raising salaries to strengthen professionalism;
Defense of state interests: Increasing the expenditures for defense and diplomacy for comprehensive protection of national interests;
Strengthening the social protection: Providing targeted support to the population via benefits and subsidies to the least prosperous citizens, raising the minimum wage level;
Developing the real sector in the economy: Supporting the strategic areas in economy’s development (agribusiness, Road Fund, energy efficiency);
Strengthening the regions: Providing support to local budgets and regional investment projects as part of decentralization reform;
Culture: Development of domestic film industry; holding the Eurovision contest; and marking historical events (the Holodomor Museum and the Heavenly Hundred Memorial).

Key Facts about the 2017 State Budget:

  • raising the threshold for pensions or monthly lifetime cash allowance from 3 minimum wage levels (UAH 4,800 in 2017) to 10 minimum subsistence levels for disabled persons (UAH 12,470), which is exempt from VAT and military tax;
  • reducing the tax burden on individuals through granting of social tax benefit at 50% of the minimum subsistence level for able-bodied persons (UAH 800) for any taxpayer, provided the income does not exceed 1.4 of minimum subsistence wages for able-bodied persons (UAU 2,240);
  • reducing as of 1 January 2017 the rent rate for natural gas extraction from 50% to 29%, from the deposit depths below 5,000m, which gas is supplied to residential consumers and heat energy producers, as well as for increasing production; and
  • to reduce the rate of growth of the state debt and debt burden on the budget, the state budget deficit ceiling for 2017 is suggested to be set at 3.0% of GDP (UAH 77.5bn) vs. 3.7% of GDP (UAH 83.7bn) in 2016.
  • raising the minimum wage, minimum subsistence income by 10.1%, which is 2 percentage points above the inflation rate;
  • increasing the amounts of pensions and state allowances with due account for the minimum subsistence income growth rate;
  • raising the salaries of educators (UAH 4.5bn budgeted additionally);
  • fulfilling all state’s obligations before creditors;
  • providing the total funding for defense at UAH 129bn (5.0% of GDP);
  • allocating an additional UAH 2bn (UAH 6bn total for this item) for centralized procurements of drugs and medical goods, including for treatment of cancer, AIDS, and TB patients);
  • increasing expenditures by UAH 75mn for implant hearing prosthetics for children;
  • including additional expenditures of UAH 350mn for accelerated repayment of debt to physical persons (citizens) based on court decisions whose enforcement is guaranteed by the state;
  • expenditures for preparation and holding in Ukraine of the Eurovision song contest (UAH 455.7mn budgeted);
  • increasing the expenditures of the Ministry of Foreign Affairs by UAH 1 billion to ensure the protection of national interests and rights of Ukrainian citizens abroad, implementation of Ukraine’s Eurointegration course, and promoting Ukraine’s positive image worldwide;
  • creating the conditions for operation of the Road Fund (UAH 14.2bn);
  • activities of the Energy Efficiency Fund is to concentrate on creating and implementing financial instruments for large-scale and immediate savings of energy resources by households;
  • support to agricultural producers;
  • UAH 1.8bn allocated for the coal industry, including UAH 0.8bn for restructuring of collieries, and UAH 1.0bn for support of operational activities of state-owned coalmining enterprises, as required for the period of implementation of industry’s reform actions.