Surprises of 2021 budget: what should doctors, teachers and all Ukrainians expect?

2021 is approaching, and therefore, the Rada is adopting a new Ukraine's budget. The draft document has remained at the Rada for a month and a half. The parliament has already adopted it in the first reading. Now the committees are discussing the document making new changes. Let's sort it out together what prospects we have next year and why the draft budget is more comparable to a fairy tale.

Major fail of the draft State Budget for 2021

Expenditures of the 2021 state budget amount to UAH 1,330,981,542,900, and revenues amount to UAH 1,092,083,254,300. The government wants to cover the deficit. Shmyhal explains how: "The growth of budget revenues by more than UAH 100 billion will be ensured primarily through recovering and de-shadowing the economy. And also thanks to finally dissolving all schemes in the tax and customs fields."

In terms of revenue, they expect most from tax revenues that being 937.5 billion, and 141 billion from non-tax revenues.

Ukraine is expecting to receive a little less than 2 billion hryvnias from the European Union, foreign governments, international organizations, and donor institutions. Chairperson of the Parliamentary Committee on Budget Yurii Aristov noted that the law draft didn't provide a financial-economic justification for budget revenues and expenditures.

So we may only guess where the money will actually come from. Financial analyst Vasyl Nevmerzhytskyi explains: "I think that next year we'll see large extents of privatization, foreign business entry, the land market opening, and hence the development of agricultural enterprises, investment in the purchase of agriculture and so on."

In 2021, they'll change the procedure for financing local budgets under the laws №562-IX and №907, adopted as part of decentralization in April and September 2020. Budget relations will be regulated on a new territorial basis. The structure excludes budgets of city districts, and provisions on merged district budgets, consolidated budgets of cities with district division. Meanwhile, regulation of regional budgets remains unchanged. The conclusion of the main scientific and expert department of the Office of the Verkhovna Rada of Ukraine reads: "Introducing a new procedure for forming the composition of revenues and expenditures of local governments and district budgets separately should be preceded by detailed calculations of changes in the financial capacity of local budgets in terms of their respective levels, considering the extent of expenditure powers and resources, functioning and responsibilities of local governments and executive authorities, and in relation to the ability to create financial opportunities for stable territories' development, prevent the risks of new regional conflicts and demotivating local authorities to increase revenues to local budgets." The document doesn't contain all these data, which incidentally violates parliamentary regulations.

Social benefits and salaries in 2021

The subsistence level will initially increase and then continue increasing from 2,189 hryvnias to 2,481 hryvnias during the year. The minimum wage will be 6,000 hryvnias for almost the entire year, and 6,500 hryvnias from December 1, 2021, which is 1,000 hryvnias more than now. Previously, such growth was always planned for July 1, but in 2021, it was postponed. Key tax rates, such as UST, income tax, VAT, military levy, will stay unchanged.

This year's Pension Fund will be lower than the previous one and amount to 203.9 billion: "An important point: reducing the Pension Fund's funding in the budget by UAH 8 billion will be compensated due to the growth of the Fund's own revenues. These incomes will be provided, in particular, due to the increase in the minimum wage," Prime Minister Shmyhal stated. He also said that pensions would increase, but didn't specify how much, because it's too cynical to call the payment growth by 165 hryvnias an increase. The minimum pension will be 1769 hryvnias at the beginning of the year and 1934 hryvnias at the end of 2021. We recall that 11 million Ukrainians receive the minimum pension in Ukraine.

Medical field and coronavirus

As for the medical field, Shmyhal promises improvement: "Medical industry. Next year we'll have record expenditures of UAH 161 billion. It's 30 billion more than this year, but approximately 65 billion more than in 2019. In fact, in 2 years, funding for the medical field will increase by over 60%. The salaries of all doctors will be increased by 30% next year," the prime minister commented.

The government is to provide UAH 16 billion to the National Health Service to combat COVID-19: "That is, hospitals will be provided with everything they need: oxygen, drugs, and personal protective equipment," Shmyhal writes on the Facebook page. "Another UAH 2.6 billion is provided for vaccination against coronavirus. The government is also in talks with international partners to obtain additional funding to buy more vaccine." However, this figure should not be comforting, as they allocated the same amount to the National Health Service this year.

As we can see, Ukraine doesn't have enough beds in hospitals, and critically lack oxygen. Oleksii Honcharenko, a People's Deputy from the European Solidarity Party, believes that the allocated 2.6 billion hryvnias for purchasing the vaccine won't be enough: "It's less than 100 million US dollars. Obviously, it's insufficient. We need 15 or 30 billion. They say different numbers. I understand that there's a business representative on the medical committee, and commercial entities will appear to offer vaccines."

Education and optimistic government prognoses

Expenditures on education are expected to increase by almost UAH 30 billion in 2021: "It will increase the salaries of educators by 26%. In addition, support programs for the New Ukrainian School will continue to work. Almost 300 educational institutions will be built and repaired next year," Shmyhal writes.

Can we call the budget socially oriented?

• The Ministry of Internal Affairs will receive 98.3 billion hryvnias
• The Ministry of Defense gets 117.6 billion
• National Agency of Ukraine for finding, tracing, and management of assets derived from corruption and other crimes: 273.5 million
• The National Anti-Corruption Bureau of Ukraine and the National Agency for Prevention of Corruption: 1 and almost one and a half billion, respectively.
• In terms of GDP, 5.92% of the country's GDP will be spent on defense in 2021.

Alternately, expenditures on the social sphere are:

• The Ministry of Education and Science will receive 103.7 billion
• The Ministry of Health: 159.2 billion
• The Ministry of Social Policy: 311.3 billion
• The Ministry of Youth and Sports: only 7.3 billion
• The Ministry of Culture and Information Policy of Ukraine: 12 million.

Can such a budget be called socially oriented? "Quite right," analyst Vasyl Nevmerzhytskyi says. "Our minimum wage is rising; money is being allocated to support small and medium-sized businesses. I think so. This is my position," he said.

To recap, on November 5, the Verkhovna Rada adopted the document in the first reading.