“The budget of several wars”: what Ukraine will spend $30 billion in 2017

Wednesday, December 21, at 4:53 am of the Supreme Rada of Ukraine adopted the state budget for 2017. The vote was the result of a 17-hour session that parliamentarians were stopped four times, before leaving for breaks. Approval of the document was preceded by a short debate, and protracted the meeting of the budget Committee.

The Prime Minister of the country Vladimir Groysman has described the budget as “man-centered”. According to him, the document envisages the increase of social standards, support of agrarian sector, the construction of roads. “We provided the cost of defense, we will build roads to support the agricultural sector, will increase wages to teachers, doctors, <…> will allocate funds for medicines,” — said Groisman. “You will witness a large-scale decentralization”, he added. The Ukrainian decentralization reform involves the Association of local budgets with the purpose of consolidation of financial resources for development in the regions.

In the words of speakers in Parliament, Finance Minister Alexander danyluk, the government kept the budget in 2017, the priorities in the first reading: improving the defense, social standards, development of education, health, targeted support for agriculture, development of road infrastructure, promotion of energy efficiency and the development of culture and support of local budgets and regional projects in the framework of the policy of decentralization.

The adoption of the state budget was one of the conditions for the continuation of the program of assistance of the International monetary Fund (IMF) to $17.3 billion, from which Kiev has received only $6.6 billion Last tranche Ukraine received in August of 2015 ($1.7 billion), the next was supposed to be $1.7 billion, but was delayed. Ukrainian authorities are waiting for the tranche from the IMF in January 2017.

Social costs and macroeconomic indicators

The Ukrainian budget provides for a threefold increase of a living wage: from 1 January 2017 to 1544 hryvnia ($58), from 1 may 1624 hryvnia ($61), from December 1 — 1700 UAH ($64). Minimum wages shall from 1 January 2017 should increase twice — up to 3200 hryvnia ($120). The minimum pension in the following year will be increased twice: in may — 1247 to 1312 UAH ($49), December — before 1373 hryvnia ($52).

In the budget for 2017 laid down the following macroeconomic indicators: GDP growth — 3%, inflation stood at 8.1%, the unemployment rate is 8.6%, level debt – 66,4% of the projected GDP, the exchange rate of 27.2 hryvnia per $1, limit the budget deficit of 77.5 billion ($2.9 billion), or 3% of GDP. The deficit is expected to decline from 3.7% of GDP by the end of 2016.

Budget revenues of Ukraine, is expected to grow by 20% to 721,4 billion ($27.1 billion). Of this amount, 17.1 billion hryvnia ($643 million) plan to gain from privatization of state-owned enterprises. The expenditures will grow by 17% to 790,4 billion ($29.7 billion). Subject to budgetary loans (provision minus recovery) expenditures of the budget increased to nearly 800 billion. The document also contains 86,89 billion hryvnia ($3, 26 billion) of external loans.

Defence and security

On defense and security in 2017, the Ukrainian authorities have budgeted is 129.3 billion ($4.86 billion at current exchange rates), or 5% of GDP. That’s about 16% of all budget expenditures. The growth of spending on these articles relative to 2016 (114.8 billion hryvnia) is 14.5%, from the presentation of the Ministry of Finance of Ukraine to the draft budget. In comparison with 2013, to “euromaidan” and the crisis in Eastern Ukraine, a military-police budget has increased almost three times (from 45 billion, or 3% of GDP).

Under the section “defense” in 2017, the Ukrainian government plans to allocate about 80 billion hryvnia ($3 billion), the money will go to the Ministry of defence, the main intelligence Directorate of the defense Ministry, State special transport service and the National guard.

“Many analysts drew attention to the fact that the budget is in favor of the security agencies, it is the budget of a police state. This is due to the war in the Donbass, internal war, war with the opposition, with corrupt officials. We have a lot of wars, for which you need to demonstrate to the public Prosecutor, the NEB [National anti-corruption Bureau] to create new law enforcement bodies”, — quotes the Kiev edition “Segodnia” former economy Minister Viktor Suslov.

For comparison, Russia “national defense” in the budget for 2017 laid 2.8 trillion rubles (3.3% of GDP). On “national security and law enforcement” the country plans to spend to 1.93 trillion rubles (2.2% of GDP). Together at the “power” article, the Russian government will allocate in 2017 of 4.78 trillion rubles, or 5.5% of GDP and almost 30% of all Federal spending.

Military requests

The Ministry of defence received the largest funding among law enforcement agencies of Ukraine. Its budget in 2017, increased by 7.7%, from 59.42 billion USD to 64 billion ($2.4 billion). This is 40% less than requested by the military funds the budget request of the Department was made 108,147 billion, wrote on his page in Facebook the people’s Deputy of Ukraine (“national front”) Dmitry Tymchuk.

Second most security Agency was the national guard (of 9.89 billion, or $372 million). The budget request of this party, controlled by the interior Ministry, more than three times more than the allocated amount of 31.3 billion.

On the third place in terms of allocations — the main intelligence Directorate of the defense Ministry of Ukraine. It has received 1,42 billion hryvnias ($53.4 million).

The budget controlled by the Ministry of infrastructure of the State special services of transport (GST) amounted to 492 million ($18.5 million). Gsst provides functioning of a transport infrastructure in peacetime and in wartime and state of emergency.

All four of the institutions entrusted with ensuring the defence of the country — in sum, these agencies will receive a minimum of 75,8 billion ($2.9 billion), it follows from the budget documents.

The interior Ministry of Ukraine in 2017 will receive 48, 4 billion hryvnia ($1.82 billion). The provision of the SBU amounted to 6.2 billion UAH ($233 million). The budget request of the Department amounted to 12.44 billion.

On the right of the state border service reserved 7.06 billion hryvnia ($266 million). The budget of the General Prosecutor’s office 5 billion hryvnia ($189 million). The national police will receive 16.7 billion hryvnia ($627 million).