Ukraine’s parliament adopted changes to the national budget for 2020 on April 13. Some of the changes allow the creation of an anti-coronavirus war chest, funded to the tune of approximately $2 billion. But government spending is being cut by about $3 billion overall. Hromadske explains how the budget is changing, and what – and how large – are the cuts.
1. The Main Numbers
Government revenues in 2020 have been marked down by 11% – about $4.4 billion – compared to earlier projections for both tax revenue and state-owned enterprise profits.
As a result, the deficit will triple – going from about $3.5 billion to $11 billion. The government’s borrowing plans have likewise tripled to cover the deficit.
Privatization revenues have also been re-adjusted – falling from about $443 million to $18 million.
Meanwhile, spending has been increased by $3 billion, of which $2 billion is earmarked for a special anti-coronavirus fund. But the lion’s share of spending in the 2020 budget is shrinking overall.
2. Government Bodies
Funding for nearly every single government body and department has been cut. Parliament has seen its funding cut by 2.3%, the Office of the President’s funding is cut by 0.4%, and the Cabinet of Ministers is facing a 47% drop in planned funding – approximately $49 million less than originally set.
However, the court system has seen an overall raise in funding, to the tune of 7%, with the Supreme Court taking 4.7% of that raise, the High Anti-Corruption Court taking 32%, and the Constitutional Court receiving a 0.8% increase in funding.
The 2020 census has been canceled due to a lack of funding – statistical research funding was cut by $46 million, leaving only $3.7 million.
3. Law Enforcement Bodies
Almost all of Ukraine’s law enforcement is feeling the sting of tighter budgets, but the Ministry of Internal Affairs – led by Arsen Avakov – has seen its numbers rise – though not by much.
The Ministry’s budget has been expanded by $7 million, though the Prosecutor General’s Office has had its funding cut by 1.4%, or $3.875 million. And the National Anti-Corruption Bureau has had a more significant cut of 11%, or $4.2 million.
Meanwhile, the National Agency on Corruption Prevention has seen a loss of $146,000, leaving it with a budget of approximately $25 million. The State Bureau of Investigations faces heavy losses, with their funding being cut by 25.6% – nearly $18 million. And another anti-corruption agency, the Agency for Investigation and Management of Assets, has also seen a 31% cut in its finances for 2020.
The 2020 budget also shows a walking back of one promise made – in this case, to farmers facing the new land market law. Previously, farmers were promised that they would have access to "guaranteed partial credit financing" for buying agricultural land – but MPs refused to include the approximately $8.9 million fund in the new budget. MPs also did not create a National Wealth Fund, which was planned to take over the management of all state-owned companies.
The budget also cuts funding for conducting an agricultural land inventory, for which funds have been slashed severely – to about $8.8 million – though this may have to do with the fact that the land market’s open date has been shifted from 2020 to 2021.
Funding for the sale of unprofitable mines has also been cut by more than half, but government spending has actually increased heavily – 81% – on rebuilding the coal industry and paying out miners wages in particular.
And the budget completely cut funding for the Energy Effectiveness Fund, which had provided cheap credit for people to insulate their homes.
Education funding as a whole is facing a 4.3% cut of $69 million – in particular, the planned Presidential Fund to Support Education is not going ahead. That fund was supposed to contain $18.4 million for stipends for gifted pupils.
MPs have likewise refused to include the Higher Educational Institutions Development Fund in the updated budget.
Funding for grants for scientific research is facing a 43% cut, and support for scientific development in universities and academies has been completely abandoned.
The program “Able Schools for Better Results”, which helped finance local budgets, has also seen a 29% cut of nearly $40 million.
To no surprise, medical budgets in 2020 are expected to grow, by an average of 16.7% of the original planned amount.
In particular, the new budget includes a program for the development of emergency medical care, with the government now planning to spend $34 million on the program. The government had previously thought to provide these funds via grants to local budgets, but now has decided to provide them directly.
Meanwhile, the National Health Agency will see a 21.7% increase in funding to $3.25 billion, of which the grand majority will be spent on creating a government program to guarantee medical aid to the population.
7. Subsidies and Pensions
Parliament increased spending on social welfare policies as a whole to the tune of $720 million, or 6.6%. Despite this, subsidy payments for utilities have been cut by $304 million – 17.4% of the total funds previously planned for disbursement.
The Pension Fund will receive an additional $1 billion, raising the state subsidy to the Pension Fund by 17.2%.
8. Culture, Sports, and New Ministries
The new budget allows for the separation of the Ministry of Culture, Youth, and Sport, into a Ministry of Youth and Sport and a Ministry of Culture. The Ministry of Youth and Sport will receive a budget of about $83 million, while the Ministry of Culture will keep $317 million in funding.
The Ministry of Veteran Affairs and Donbas Reintegration will also be split in two, with the new Ministry of Donbas Reintegration receiving a budget of $29 million.
Additionally, the so-far uncreated Bureau of Financial Investigations – meant to take over economic crimes from the police, Security Service of Ukraine, and the tax authorities – will be given about $24 million, half of what was originally planned.
9. Financing the Regions
MPs have decided to provide additional funding to the tune of $26.69 million to the 24 regional government administrations (with the average regional administration receiving a little over $1 million.
The Regional Development Fund will be cut by a third, however, from $277 million to $181 million. And grants for socio-economic development have been cut by 15%, while grants to support regional government administrations will be cut entirely.