Week’s balance: Budget wars in Rada, Groysman’s six-month report, and money for gas

Maksym Shevchenko

The Verkhovna Rada of Ukraine adopted in first reading the draft state budget-2017, Prime Minister Volodymyr Groysman presented a report on six months of the Cabinet’s work, while the World Bank has provided $500 million for Ukraine’s gas purchases – these are the main economic news of the past week.

The Cabinet seems to be serious in its intentions to observe all the rules of the budget process as last week it tabled in the Verkhovna Rada a draft budget for 2017. The MPs did not lose a chance to add as many amendments to a general “wishlist” as possible. 1,167 amendments have been registered. 

Amid an unstable macroeconomic situation and the urgent need to reduce public spending, the changes proposed by the MPs would have required additional funding amounting to some UAH 1 trillion with a total revenue part of the budget at just UAH 706.3 billion. In this regard, only 408 amendments were taken into account, while the remaining 759 were rejected as they violated the balance of revenue and expenditure parts of the budget.

However, among the amendments that passed the vote there were also some rather controversial ones. In particular, while the National Bank of Ukraine stated an indicative opportunity to allocate UAH 31 billion to the budget-2017, the Government-proposed draft budget stipulated an increase of this sum to UAH 41 billion.

Moreover, the Rada’s amendments brought this figure to UAH 45 billion - and this is in the wake of a more than fragile macroeconomic stability. In addition, the approved changes include an increase in income from rent payments for amber extraction at the level of UAH 7 billion - an increase by UAH 2.8 billion compared with the government's version of the budget.

At the same time, amber mining industry has not yet been put into a legal framework. Also the amendments include changing the source of getting a UAH 1 billion funding to support the local communities within the framework of decentralization. Earlier it was planned that these funds would be allocated from the confiscation of the arrested assets of Yanukovych's regime, but now the burden is shifted onto the budget’s general fund.

At the same time, the Verkhovna Rada is persistently failing to pass an asset recovery law, which would give an opportunity to enroll $1.5 billion of the stolen funds back to where they belong, that is to the Ukrainian budget.

The deputies did not forget about themselves, either. Financing of parliamentary staff, including support of subordinated media, increased by UAH 139.3 million. Anyway, the amendments were approved by the Verkhovna Rada, and the draft budget passed its first reading with 230 votes. In turn, the Ministry of Finance is now obliged to consider the proposals approved by the deputies.

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