The government had to cut costs on all items except pensions, writes Business capital.
The state of public finances can be assessed from various perspectives. The government, for example, prefers to compare it with previous years. Actual state budget expenditures in 2016, according to the State Treasury Service, amounted to UAH 684,7 billion, an 18,7% increase compared to 2015. However, considering that consumer prices in 2016, according to the State Statistics Service, increased by 13,9%, and industrial producer prices by a whopping 20,5%, the growth figures for budget expenditures are no longer impressive.
An even harsher reality emerges when comparing actual expenditures with planned ones, that is, looking specifically at budget execution. It turns out that the actual UAH 684,7 billion is UAH 23,6 billion less than planned. Furthermore, more than half of the budget lending plans have been disrupted: only UAH 7,1 billion in loans were issued (less than in 2015), despite the planned UAH 15,9 billion.
Of the major spending areas, only one was fully funded—social protection for pensioners. Meanwhile, the defense sector was short of almost UAH 7,4 billion, a ninth of the promised funds. UAH 11,2 billion less was allocated to economic activity than planned, and this shortfall, incidentally, accounts for the shortfall at Ukroboronprom. In November 2016, the concern's CEO, Roman Romanov, predicted that the concern's shortfall in state defense procurement for 2016 would amount to approximately UAH 1 billion. At a meeting of the National Security and Defense Council on January 27, 2017, Petro Poroshenko confirmed that the defense industry was experiencing serious financial problems: "General fund expenditures of the state budget, which accounted for approximately 58% of total funding, were 100% funded, while special fund expenditures were less than 1% funded." Based on the figures cited by the president, it is easy to calculate that the defense industry did not receive 41% of the money promised to it.
Among other economic sectors, the electricity sector (UAH 2,3 billion in loans) and road infrastructure (UAH 2,5 billion in loans and UAH 1 billion in budget expenditures) suffered the most significant shortfalls. Furthermore, higher education received UAH 3,6 billion less than planned, and the housing and utilities sector missed out on UAH 2 billion in loans from the state treasury.
This picture seems surprising given the State Fiscal Service's upbeat reports. Annual plans for income tax, profit tax, excise taxes, VAT on goods imported into Ukraine, and import duties were exceeded by a total of UAH 28,7 billion. Several non-tax revenue items also exceeded their targets. Additionally, UAH 42,8 billion was saved due to lower-than-planned repayments of domestic and foreign debt obligations.
However, all these successes were offset by serious setbacks, caused by various factors. First and foremost, budget planning traditionally involved sober calculation competing with the desire to satisfy the wishes of external creditors, various agencies and state-owned companies, governors, and parliamentarians. Then, parliamentarians repeatedly sabotaged the passage of laws (for example, on special confiscation) that could have refilled the treasury, while at the same time diligently sending signals to the West that discouraged assistance to Ukraine. The disruption of budget plans was further exacerbated by the inconsistency of the government, agencies, state-owned companies, and local authorities, which led, in particular, to the failure of privatization (which generated only 1% of the planned funds in 2016). As a result, if you add up all the items from which the state budget lost revenue, the resulting gap amounts to over UAH 112 billion.
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