A Financial and Economic Forum
27 August 2009
Discussing the Topical Issues of Budget Policy for 2009-2010
A Financial and Economic Forum devoted to the topic of "Formulation of Forecast Indicators for 2010 Local Budgets" convened at the premises of the Ukrainian Ministry of Finance on 27 August 2009. The event was organized by the Ministry of Finance with support from the Municipal Finance Strengthening Initiative project, which is implemented by IBSER with support of USAID, as well as the Public Administration Reform project sponsored by the German Technical Cooperation Society.
The Financial and Economic Forum was attended by representatives of the Cabinet of Ministers' Secretariat, Budget Committee of Ukrainian Parliament, Association of Ukrainian Cities and Communities, Association of Financial Officers of Ukraine, and the Presidium of the Council of Village and Settlement Mayors attached to the Cabinet of Ministers, heads of local finance departments, and oblast State administrations.
The key objective of the event was discussing the topical issues in the formulation of forecast indicators of local budgets for the year 2010, as well as reviewing the Draft Law of Ukraine “On the State Budget for the Year 2010” with regard to local budgets and intergovernmental finance relations.
The participants considered and discussed the topical issues of budget policy for 2009-2010. At the time of preparing the 2010 budget, special focus is made on the issue of allocation of intergovernmental transfers as an important stimulus for the development of local budgets in Ukraine. That is why the main emphasis in the budget policy for the year 2010 is made on moving to a qualitatively new level of intergovernmental finance relations between the State budget and local budgets, with the key innovation being the establishment of direct relations between the State budget and budgets of villages, settlements, and rayon-significance cities.
It should be noted that the intergovernmental finance relations planned for 2010 are based on the Law # 1540 adopted by Verkhovna Rada on 23 June 2009 "On Amending the Budget Code of Ukraine," which has been vetoed by the President of Ukraine. Nevertheless, the existing budget legislation allows enacting the required provisions by means of the State Budget Law.
Therefore, it is expected to introduce direct intergovernmental finance relations with 11,813 local budgets in 2010. The share of expenditures implemented by the State budget will be transferred to local budgets, with simultaneous provision of resource base to cover these expenditures (nine types of fees totaling Hr 1.1bn have been transferred from the State budget into local budgets). It is planned to expand the revenue sources for local development budgets at the expense of a share in enterprise profit tax, personal income tax, and surplus revenues from national taxes and fees. When estimating the amount of equalization grant due to local budgets, new formula-based approaches to distribution of expenditures suggested by IBSER experts have been taken into account, in particular with regard to the expenditures for social protection and social security.
According to the Ministry of Finance 2010 estimates, GDP is expected to grow by 14.0% against the projected 2009 figure, the inflation rate – by 9,7%. Gradual raising of minimum wages from Hr 681 to Hr 734 is planned during the year 2010. The average wages level would reach Hr 700.3 compared to Hr 629.1 in 2009. It is also planned to raise the official salary of the 1st pay grade employees according to the Unified Pay Grid by the forecasted for 2010 inflation rate, i.e. to Hr 598 by the end of 2010.
The General Fund of local budget revenues will reach Hr 129.5bn, including Hr 65.4bn in own-source revenues of local budgets (without intergovernmental transfers), which is 7.4% more than the 2009 plan. The Special Fund revenues of local budgets will grow by 5.5% to an estimated Hr 15.2bn.
It is planned to increase the General Fund expenditures of local budgets (without intergovernmental transfers) by 20.4% against 2009 to Hr 103.0bn. The payroll with taxes for the public sector will grow by 13.3% to Hr 66.4bn. Expenditures for utilities and energy are to increase by an average of 9% against the 2009 level.
The expenditures of local budgets for social protection programs, which are financed by subventions from the State budget, will grow by Hr 4.5bn. The equalization grant will increase by 38.9% to Hr 46.4bn.
The Financial and Economic Forum was attended by representatives of the Cabinet of Ministers' Secretariat, Budget Committee of Ukrainian Parliament, Association of Ukrainian Cities and Communities, Association of Financial Officers of Ukraine, and the Presidium of the Council of Village and Settlement Mayors attached to the Cabinet of Ministers, heads of local finance departments, and oblast State administrations.
The key objective of the event was discussing the topical issues in the formulation of forecast indicators of local budgets for the year 2010, as well as reviewing the Draft Law of Ukraine “On the State Budget for the Year 2010” with regard to local budgets and intergovernmental finance relations.
The participants considered and discussed the topical issues of budget policy for 2009-2010. At the time of preparing the 2010 budget, special focus is made on the issue of allocation of intergovernmental transfers as an important stimulus for the development of local budgets in Ukraine. That is why the main emphasis in the budget policy for the year 2010 is made on moving to a qualitatively new level of intergovernmental finance relations between the State budget and local budgets, with the key innovation being the establishment of direct relations between the State budget and budgets of villages, settlements, and rayon-significance cities.
It should be noted that the intergovernmental finance relations planned for 2010 are based on the Law # 1540 adopted by Verkhovna Rada on 23 June 2009 "On Amending the Budget Code of Ukraine," which has been vetoed by the President of Ukraine. Nevertheless, the existing budget legislation allows enacting the required provisions by means of the State Budget Law.
Therefore, it is expected to introduce direct intergovernmental finance relations with 11,813 local budgets in 2010. The share of expenditures implemented by the State budget will be transferred to local budgets, with simultaneous provision of resource base to cover these expenditures (nine types of fees totaling Hr 1.1bn have been transferred from the State budget into local budgets). It is planned to expand the revenue sources for local development budgets at the expense of a share in enterprise profit tax, personal income tax, and surplus revenues from national taxes and fees. When estimating the amount of equalization grant due to local budgets, new formula-based approaches to distribution of expenditures suggested by IBSER experts have been taken into account, in particular with regard to the expenditures for social protection and social security.
According to the Ministry of Finance 2010 estimates, GDP is expected to grow by 14.0% against the projected 2009 figure, the inflation rate – by 9,7%. Gradual raising of minimum wages from Hr 681 to Hr 734 is planned during the year 2010. The average wages level would reach Hr 700.3 compared to Hr 629.1 in 2009. It is also planned to raise the official salary of the 1st pay grade employees according to the Unified Pay Grid by the forecasted for 2010 inflation rate, i.e. to Hr 598 by the end of 2010.
The General Fund of local budget revenues will reach Hr 129.5bn, including Hr 65.4bn in own-source revenues of local budgets (without intergovernmental transfers), which is 7.4% more than the 2009 plan. The Special Fund revenues of local budgets will grow by 5.5% to an estimated Hr 15.2bn.
It is planned to increase the General Fund expenditures of local budgets (without intergovernmental transfers) by 20.4% against 2009 to Hr 103.0bn. The payroll with taxes for the public sector will grow by 13.3% to Hr 66.4bn. Expenditures for utilities and energy are to increase by an average of 9% against the 2009 level.
The expenditures of local budgets for social protection programs, which are financed by subventions from the State budget, will grow by Hr 4.5bn. The equalization grant will increase by 38.9% to Hr 46.4bn.
Glyanec