Analysis of the draft State budget for 2019

The government and the President claim that Ukraine’s economy is growing. However, this is not true. According to the State Statistics Service, the real GDP of Ukraine in Q3 dropped from 3.8% to 2.8%. Over 5 years, neither the President nor the government has done anything to develop production, aircraft manufacturing, engineering, shipbuilding, and light industry.

The small GDP growth rate that we have today is a consequence of the development of the trade sector, instead of the production one. Moreover, we are talking about the trade of imported goods, due to which there is such pressure on the exchange rate.

The lack of foreign trade in goods is the difference between the export and import of goods. Today, this figure has grown by as much as 62% – up to $6.5 billion. This is proof that we are not producing anything, but only importing goods.

In addition, the import of goods from Russia is growing – by as much as 21%. Russia is still the main trading partner of Ukraine.

We buy the majority of goods from the enemy – ranging from ordinary cotton wool to premium badges for railway workers.

Due to the fact that we have an oligarchic economy, we will have significant problems with the exchange rate. At present, the gold and foreign exchange reserves of the NBU are 40% less than necessary. Now they are about $18 billion. This is a critical level.

What doe this mean for people? Oligarchs drain resources, withdraw currency from the country, and then ordinary people have to pay for this from their wallets. The state budget is the main financial document of the state. But in fact, there is nothing laid in it for people and business. This is the budget of the oligarchs. This is the budget of subsidies, oligarchic schemes, kickbacks, and repayment of debts that have been plundered.

NB!! Samopomich has its own vision of the budget policy and how the state budget should look like. However, our offers were rejected.

This budget is written for the IMF and their tranche, and not for Ukraine.

The government has once again deceived the business, because the budget is calculated on the basis of the old income tax, and not on the basis of the tax on the withdrawn capital.

Indeed, we possess a resource that at times exceeds the assistance from the IMF, but the government is doing nothing about it. After all, the tax on withdrawn capital provides additional GDP growth of at least 1% annually and an influx of investments of at least 110 billion UAH annually. Unfortunately, the funds from the termination of schemes at the customs are also not in the budgetAnti-offshore legislation, unfortunately, has not been presented by the authorities either.

State budget revenues make up 1 trillion hryvnias.

In the updated budget, the government increased the revenue and expenditure plan by UAH 18 billion.

The main items for increasing revenues are:

– tax on corporate profits (excessive)

– increased amount of transfer of profits from the NBU;

– increased income from rent due to higher gas prices.

The revenues from the customs clearance of cars with foreign registration are expected at the level of 4 billion UAH.

The proposals of the Samopomich faction to introduce an electronic excise stamp at the state level, which would help save UAH 3.5 billion per year, were not taken into account.

Pensions

In order to cover the deficit of the Pension Fund 167 billion UAH are expected.

This figure has increased by 27.7 billion UAH as compared to 2018.

Energy efficiency

The finalized draft budget 2019 left the financing for the “warm loans” in the amount of 400 million. For the Energy Efficiency Fund – 1.6 billion.

The price of gas for the population has already increased by 23.5%. Even with the old price, people’s debts for the supply of natural gas amounted to 16.7 billion hryvnias, for centralized heating and hot water supply – to 10.8 billion hryvnias. Further increases will be even more unaffordable.

The solution is to increase the subvention for subsidies to 60 billion hryvnias and increase funding for the “warm credits” program. The government allocated only 400 million hryvnias. Samopomich insists on increasing this figure to 2 billion hryvnias. Then it will be possible to attract about 230 thousand loans, which will have an effect for more than 700 thousand households. At the same time, the predicted volume of gas savings will reach more than 300 million cubic metres per year. Savings for the budget will amount to more than 2 billion hryvnias, which will even exceed the expenditures from the budget for this program.

Subsidies

58 billion UAH in total are provided for subsidies, which is 13 billion less than in 2018.

There is going to be a partial monetization of subsidies.

The government does not announce that the budget also provides for a second increase in the price of gas for the population up to 9,500 UAH from May 2019.

Defence

Security is the most expensive service. It should be ensured by the best. And if we want to attract the best, then the state must be honest. This is not the way things are now.

In the time of the Russian aggression, the defence of the state should be a priority. Yet, for some reason, in the draft state budget, it is planned to increase the expenses for the Ministry of Internal Affairs by 25% and on the Security Service on 17%.

The authorities are afraid of revolts or how else can they justify these figures?

Altogether, 110.9 billion UAH are provided for the defence in the draft state budget for 2019. This is 17% or 18.6 billion UAH more than in 2018.

The draft budget provides for a reduction in the expenditures on housing for the military by 17.4 million UAH or 2% less than in 2018.

2018    2019    Difference

957      940      -17

645.1   227.9   417.2

The state should be expressing its love with money and should show the soldiers that while they are defending the country, the country has not forgotten about them.

It is also necessary to provide funding for the military to be able to obtain new specialties and funding for housing of the military. Samopomich insists on tripling the funding for the housing. The state budget is going to provide 840 million hryvnias for this. That is the cost of about a thousand apartments. At the same time, there are 255 thousand people serving in the Ukrainian army.

The state should take care of ordinary soldiers. Samopomich insists on decent payment for soldiers – at least $1,000. In addition, it is necessary to establish a rigid control over who will receive this money. These are the soldiers from the front line that should receive it, not armchair warriors.

Samopomich requires reforming the system of benefits. The state is deceiving people because it has promised land to all veterans. But the state has no land. Therefore, the state has laid this responsibility on the shoulders of local governments. The state promises combat payments, payments for the destroyed equipment of the enemy – but does deliver on its promises. All promises of the state have turned into corruption schemes.

The way out of this is fair cash payments. For example, the Lviv City Council pays 100 thousand hryvnias of compensation to each veteran for participating in hostilities. But this should be the responsibility of the state, not the city. Soldiers are performing a state function of protecting the territorial integrity.

P.S: Additional funding will be provided for the replenishment of the authorized capital of an authorized enterprise for managing state-owned objects in the defence and industrial complex – 2.9 billion UAH (“Ukroboronprom:)

Security Service

In 2019, the government suggests providing 9.6 billion UAH for the Security Service.

This is 17% or 1.4 billion UAH more than it was in 2018.

Prosecutor’s Office

In 2019, 7.3 billion hryvnias will be allocated for the Prosecutor General’s Office, which is 150 million more than in 2018.

Ministry of Internal Affairs

The cost of the Ministry of Internal Affairs is 83 billion UAH, which is 25% or 16.7 billion UAH more than in 2018.

On the construction of housing 580 million UAH are provided.

Education

Education is the future of the state. One should never save on the future.

The draft state budget for 2019 provides 126 billion UAH for education. This is 17% more than in 2018.

Of these, 93% are consumption expenditures and only 7% are development expenditures.

71.8 billion UAH are provided for secondary education, which is 7.8 billion more than last year.

Secondary education accounts for 59% of all expenditures on education. From which, 98.6% are consumption expenditures and 1.4% are development expenditures.

36.7 billion UAH are provided for higher education, which is 1.5 billion more. Higher education accounts for 35.5% of the cost of all education. 93.7% – consumption expenditures and 6.3% – development expenditures.

11.3 billion are allocated for professional training and improvement of skills of employees of various ministries and departments.

Statistical information

16,176 schools

3.9 million students

441 thousand teachers

The average salary in Ukraine in 2018 is 9,042 hryvnias.

The average salary of teachers is 7,600 hryvnias.

Samopomich emphasizes the inadmissibility of saving on education and says that no big money is needed for this. For example, in order to set up 2,000 rooms of natural sciences in schools, it is necessary to find only 280 million hryvnias in a trillion budget.

Another important issue is the salary of teachers. We constantly hear that there is no real increase in salaries on the ground. Samopomich proposes to finance the educational subvention in accordance with the real needs of the industry. The salaries of teachers should grow not only on paper.

Science

The funding for research projects should double. Young scientists should have access to financial resources. The newly established National Research Foundation should be responsible for this.

Of course, the National Research Foundation has got no additional funds. A little more than 262 million hryvnias are left.

National Council for the Development of Science and Technology. No changes here – 0.5 million hryvnias. There is no question of analytics and full performance of functions under such conditions.

For 2019, another 50 million hryvnias are once again provided for the functioning of the Innovation Development Fund. Let me remind you that this year these funds have just gone down the drain, because there is still no Fund.

Samopomich had submitted its amendments to the budget regarding the increase in spending on science, but they were not taken into account.

Interestingly. The Verkhovna Rada proposed to the Ministry of Finance to resolve the issue of financial support for the costs of creating and maintaining the Foundation of the President of Ukraine for supporting educational and scientific programs for young people.

1 billion was found.

Just think of it. It turns out that there was an extra billion for science. I had just gone unnoticed at first.

And, in the end, this money was given to the President, instead of giving it for science.

Medicine

The cost of all health care amounts to 186.6 billion hryvnias. This is 18.4% or 34.4 billion hryvnias more than in 2018.

In particular, expenses have been increased for the implementation of public investment projects in the field of healthcare by 1.3 billion UAH, for the centralized acquisition of medicines for the treatment of cardiovascular, cerebrovascular, oncological, and oncohematological diseases – by 626 million UAH, for the treatment of Ukrainian citizens abroad – by 300 million UAH, as well as for the medical subvention from the state budget to local budgets – by 190.9 million UAH.

At the same time, the government ignored proposals to increase expenditures for the emergency medical care system by 6.3 billion UAH. For the following year, instead of required 11 billion UAH, the government found less than 1 billion UAH for five regions (Vinnytsa, Poltava, Odesa, Donetsk, Ternopil) and Kyiv as the pilot localities. All the rest nineteen regions are left without nothing. Samopomich requires state funding for the urgent needs of all twenty-five Centres for emergency medical care and disaster medicine to create equal conditions and opportunities for providing emergency medical care to everyone who needs it.

In the state budget for 2019, the cost of subventions for the purchase of medicines and medical products for the provision of emergency medical care is half the announced need and amount to only 138.0 million UAH. The government did not consider the proposal to finance the difference.

Medical subvention from the state budget to local budgets amounts to 55.7 billion UAH, although the minimum need is 94.3 billion UAH.

Data from the State Statistics Service show that health workers have the lowest wage level. Therefore, Samopomich demands from the government to increase the size of official salaries by at least 2 tariff categories of the unified tariff system in order to increase the remuneration of medical workers.

Local government

The budget-2019 is once again “robbing” local budgets. This time, the draft budget significantly reduced the amount of funding for the educational subvention (by 14.6 billion hryvnias) and the medical subvention (by 12.1 billion hryvnias). This means that the local governments will be forced to cover these funds from their own funds by reducing their development budgets. Looks like the government wants to turn local governments into “salary payment offices” under the powers delegated by the state.

At the same time, an additional subvention to local budgets in the amount of 14.9 billion UAH is allocated to regional state administrations, which will decide on how to distribute it. This mechanism will make mayors and rural heads dependent. Obviously, there is not enough money for everyone, but only for the “obedient” ones.

The state is not fulfilling its obligations towards the united communities. The subvention for the development of UTC infrastructure does not meet the standards set by the government itself and is by 2.4 billion UAH less than the needed level.

Credits for the youth

The state should stop labour migration. Over two years, 4 million young able-bodied people have left Ukraine. One of the ways to keep able-bodied youth in the country is to implement the program of giving preferential credits to the youth for purchasing housing.

Presently, the government plans to allocate one and a half times less money for such a program than for the maintenance of the Cabinet’s car fleet.

Samopomich offers a new efficient budget program with funding of more than 1.5 billion hryvnias.

Public television

As for public television: in the version of the budget prepared for the 2nd reading, the costs amount to 1 billion UAH.

The version for the first reading provided for 1.8 billion UAH.

That is, independent public broadcasting has been deprived of 800 million UAH.

Agro-Industrial Complex

Agricultural subsidies remain at the same level – 6 billion UAH – under the same ineffective programs that were there this year and under which oligarch enterprises have already received 1 billion UAH. Each hryvnia of subsidies should reach the farmers, not the holding

Debts

In 2019, the expenditures on debts are staggering – one-third of budget spending (34%, 427 billion UAH) will be spent on debts. This is a threat to national security.

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