The Verkhovna Rada has adopted in the second reading and as a whole the draft law on the State budget for 2021 No. 4000. 289 deputies voted "for" with the required number of 226 votes.
The draft budget was presented to the parliament by the Minister of Finance Serhii Marchenko for the second reading. According to him, in the process of finalizing the budget for 2021, the Ministry of Finance consulted with the IMF to form a common vision of the income, expenditures, and deficits key indicators.
"In general, the parameters of the budget for 2021 coincide with the Fund's specialists’s estimates," he said and added that the budgetary conclusions took into account parliamentary proposals for more than 14 billion UAH.
Marchenko called this project "the budget of opportunities". In turn, the people's deputy from the "European Solidarity" Oleksiy Honcharenko called this law "a budget of impudence" and said that with such a law the government "wants to play a dirty trick."
And the people's deputy from "Voice" Yaroslav Zheleznyak called the 2021 budget a "stratospheric" one, as it has a space hole in the amount of 240 billion UAH deficit.
2021 state budget expenditure
- GDP—4.5 trillion UAH. GDP growth—at the level of 4.6%;
- public debt to GDP—64.6%;
- consumer inflation—7.3%;
- the state budget deficit—5.5% of GDP (246 billion UAH);
- the average annual rate— UAH 29.1 UAH per dollar.
The country's security and defense expenditures will amount to 5.93% of GDP. For health care the budget provides 4.3% of GDP. Capital expenditures — UAH 100 billion.
Main changes in state budget indicators
2021 state budget revenues were increased by 20.9 billion UAH (or 2%), including 13.5 billion UAH in the general fund, and 7.4 billion UAH in the special fund. Expenditures were reduced by 2.8 billion UAH, including 11.05 billion UAH on the general fund, and increased by 8.3 billion UAH on the special fund.
In the initial version, the budget revenues were provided for at the level of 1.071 trillion UAH, expenditures— 1.350 trillion UAH. In the version approved by the second reading, revenues were increased to 1.092 trillion UAH, expenditures were reduced to 1.328 trillion UAH.
The deficit was reduced by 23.7 billion UAH, or by 8.8%, including 24.6 billion UAH in the general fund, and increased by 830.2 million UAH in the special fund. Thus, it is proposed to set the ceiling of the state budget deficit at the level of 5.5% of the forecasted GDP (that is, it was reduced by 0.5% in comparison with the draft presented for the first reading).
However, according to the budget committee conclusion, this level does not meet the requirements of the second and third paragraphs of the Budget Code, Article 14 (1st part) regarding the establishing of the state budget deficit ceiling not exceeding 3% of GDP. With regard to the revised draft law’s section "Final provisions", second paragraph of clause 3, it is proposed to suspend the above-mentioned norms of the Code in 2021.
The ceiling budget deficit is 246.6 billion UAH, the ceiling general fund deficit is 220.87 billion UAH, the ceiling special fund deficit is 25.77 billion UAH.
The budget fund for debt operations was reduced by 30.55 billion UAH. The volume of payments for the state debt repayment was increased by 29.86 million UAH, for the external public debt repayment—by 1.2 billion UAH, and for the domestic public debt repayment—by 27.88 billion UAH.
The fund's external financing for debt operations was increased by 49.17 billion UAH, while internal financing was decreased by 79.71 billion UAH.
Minimum wage and minimum subsistence level
In the revised draft law, the increase in the monthly minimum wage to 6,500 UAH was postponed from July 1 to December 2021.
The subsistence level per person per month: from January 2021 will be 2,189 UAH, from July—2,294 UAH, from December—2,393 UAH. For children under the age of 6: from January—1,921 UAH, from July—2,013 UAH, from December—2,100; for children aged 6 to 18: from January—2,395 UAH, from July—2,510 UAH, from December—2,618 UAH. For employable persons: from January—2,270 UAH, from July—2,379 UAH, from December—2,481 UAH. For persons who have lost the ability to work: from January—1,769 UAH, from July—1,854 UAH, from December—1,934 UAH. Minimum pension: from January—1,769 UAH, from July—1,854 UAH, from December—1,934 UAH.
"The minimum subsistence level per person per month (including for the main social and demographic population groups) has not been changed in the revised draft law in comparison with the draft presented for the first reading. So, clause 2.14, part 2 of the Budget conclusions regarding a possible further increase in state social standards in 2021 was not taken into account," the conclusion of the committee states.
When revising the draft state budget for 2021 for the government second reading, the main forecast macro-indicators of economic and social development for 2021, that were the basis for the budget indicators calculation, have not been changed, despite the fact that, according to expert estimates, certain forecast macro-indicators are considered to be rather optimistic or inflated.
The approved draft budget provides for an increase in the doctors’ salaries by 30%, and teachers’ salaries — by 26%.
Fight against coronavirus
The Cabinet of Ministers redistributed some of the state budget expenditures, increasing the expenditures of the COVID-19 Fund by 6 billion UAH—from UAH 66 to 72 billion.
According to the people's deputy from the "European Solidarity" Oleksiy Honcharenko, the Prime Minister Denis Shmyhal promised that medicine will be financed in the required amount. That is, the prescribed amount will be included in the budget, but then the government will manually provide money for the necessary areas during the year. Thus, the amount that is included in the budget for financing medicine is not final, it will be supplemented all the time.
"It is envisaged to create a special fund to vaccinate the population and prevent the spread of the pandemic, as well as to raise wages," Marchenko said in response to a question about whether the special fund provides for help and free vaccinations for doctors.
Changes to the budget code
Draft law 4100-d, in particular, defines the specifics of the state guarantees provision and the state derivatives management. In the second reading, the exclusion of the rule on the Ministry of Finance's right to conduct transactions with derivatives in excess of the amount determined by the state budget was supported. The law will also allow the Treasury to raise funds from the Treasury Single Account (TSA) to cover temporary cash gaps in the state budget general fund.
In addition, the people's deputies expanded the Ministry of Finance's capabilities in the government securities market and provided entrepreneurs with support in the form of government guarantees on a portfolio basis.
According to people's deputy Honcharenko, the Rada voted for two mutually exclusive amendments to the Budget Code. One amendment provides for the preservation of 13.44% of the excise tax on fuel in the general funds of local government budgets for one year as a temporary measure, and the secondone—on a permanent basis. At the same time, the second amendment does not take the excise tax from the state budget revenues.