Archive for December 22nd, 2014


The 2015 Budget (Again)

December 22, 2014

About a month ago, an entry was published regarding the 2015 budget for Ukraine – an entry that given the current exchange US$/UAH exchange rate, undoubtedly underlines the NBU sentiment at that time as being more than a little optimistic.  The Hryvnia has further devalued against the US$ since then, as was fairly clear to many that it would.

With the headline budgetary decision likely to be 5% of GDP going to the defence sector, approximately UAH 86 billion, and the Ukrainian military industrial complex already working in overdrive with some facilities working 3 shifts 24/7, all would appear to be good – except Ukraine still has to purchase and import high-tech lethal and non-lethal weaponry too, and a weak Hryvnia makes those imports more expensive – no different to anything the nation imports.

Whatever – this entry is not directly about currency exchange, imports, exports or inflation, even though it is about the 2015 budget.  More to the point, any optimistic (or otherwise) underlying exchange rate upon which any 2015 budget is notionally based, can have no impact when there is still no adopted budget for 2015.  The Law of Ukraine requires any sitting government to submit, and parliament debate, amend and ultimately pass, any annual State Budget prior to the budgetary period beginning – namely 1st January.

Now it has to be said that regardless of any previous close runs/overruns relating to this law – generally the entirely fictional State Budgets are passed prior to the statutory deadlines.  That, however, was then – and this is now.  Now, something less than entirely fictional is required.  Now the IMF requires something less fictional.  Now the World Bank requires something less fictional.  Now the EBRD requires something less fictional.

Much more to the point however, a good number of cross-party RADA MPs require something less fictional too, or they won’t vote the budget through.  Many are demanding that budgetary decisions that specifically effect “committee x” from amongst the 27 RADA committees, are allowed to debate that specific part of the budget within the affected committee.  There are then the Institutions of State and the need to reach a consensus amongst MPs as to what budgetary cuts are applied and where.  (One can hardly help but to suggest the immediate culling of the Ministry of Information Policy as an obvious saving.)

What of the National Anti-Corruption Bureau?  According to those that dwell within the bowels of the RADA, it as yet does not appear within the 2015 budget.  Thus far nobody (presidentially preferred foreign national) has been appointed to head it, and it would appear to have no funds due to currently not being on the budget, even if a foreigner is found to head it.  It is not an agency that can be postponed until “better times”.  Can there be a worse possible start to a National Anti-Corruption Bureau than to have its funding opaque because it didn’t appear in the 2015 budget?  An entirely avoidable situation.

More fundamentally though, what sort of budget will it be when going behind the numbers?  An oligarchy/big business friendly budget – or a “little person”/SME friendly budget?  Is it much more necessary to support those that employ huge numbers of Ukrainians and account for a significant percentage of GDP for the next 12 months, probably to the public angst, or to have a budget that is friendly to the rest of us who are already crowd funding the military, paying “War Tax” from the interest on savings that remain in Ukrainian banks, and daily buying medical supplies from pharmacies to donate to both the front line and Ukraine’s ever growing IDP population?

Should a “progressive taxation” law be introduced (the more you earn, the more you pay) considering the extremely fragile economic state of the nation?  Such a law can always be repealed in the future.  Indeed there are a raft of taxation possibilities – from increases, to exemption in the case of donations to the military or IDPs.  If this route is to be taken, should these decisions not be taken, and laws introduced, prior to any budget?  Is it wise to put the budgetary cart before the taxation horse, to then find the horse does not pass through the RADA?

Having spent 6 weeks after the RADA elections creating a multi-party coalition agreement and in effect slowing to glacial any RADA work during that time, should there now not be an equal amount of time spent working on a (transparent) budget worthy of the name – even if to do so, the 1st January passes without a budget?  Which is the worse precedent?  To bundle through yet another economic fairytale that will be based upon shifting legislative foundations and comply with the law even if in doing so what is produced is utter (and unworkable) fiction, or submit something half decent, if slightly late contrary to legislative timetables?

With a maximum of 8 working days remaining, can and will anything approaching a genuine, realistic budget pass through the RADA after necessary debate – or will the budgetary 2015 begin no differently than any of the other preceding 23 years of an independent Ukraine – line item after line item of opaque, grotesque fantasy?

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