The Government has defined the powers of the Ministry of Finance in fiscal risk management

The Cabinet of Ministers has defined the powers of the Ministry of Finance in #fiscal_risk _management. The corresponding decree of the Government is aimed to implement the European approach in the performance assessment of state-owned companies and their impact on the state budget applying the best international practices in fiscal risk management.

In 2014 state-owned companies generated UAH 115 bln of losses which is equal to 7.2% of Ukraine’s GDP. The assets of these companies total UAH 870 bln, which is equal to 22% of the country’s GDP. At the same time, their net profit and dividends paid on state-owned shares were only equal to 0.7% of the total state budget revenues in 2014. 

The low effectiveness of the state-owned companies results in significant fiscal risks for the state budget, including lower budget revenues due to outstanding taxes and dividends as well as potential risks related to the government-backed debts of the state-owned companies as well as permanent lack of funding for the state-owned companies which can lead to a higher need for direct funding from the state budget for some activities.

Taking this into consideration, the Ministry of Finance is going to systematically assess fiscal risks related to the operation of the state-owned companies and to minimize their negative impact on the budget and the fiscal policy of the country.

The above decree is aimed to create a fiscal risk management system which shall include the below elements:

- identification of major risks for the state budget related to the operation of state-owned companies;
- evaluation of the volume and probability of fiscal risks;
- identification of policies and steps to minimize risks and their negative impact on the state budget; implementation of these policies. 

The Ministry of Finance will set up a dedicated unit in charge for the detection, monitoring, reporting and elaboration of a strategy for the mitigation of major fiscal risks related to the public sector.

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