Experts call upon the state to change the fundamental approaches to national budget formation


Experts lay out a number of arguments for the state to manage the budget  in a different, more efficient way.

Kyiv, May 17, 2016. The authorities must fundamentally change approaches to formation of the national budget. Transparency, anti-corruption focus and authorities’ commitment must become their main principles. Experts of the Institute for Social and Economic Studies (hereinafter – Institute) expressed this consolidated position at a press briefing at Ukraine Crisis Media Center.

“Too much emphasis is laid on quantitative indicators in the process of the budget policy formation. This leads to conflict of the goals of various parties involved in the budget process, for instance, the National Bank of Ukraine, respective ministries and local government authorities,” said Yaroslav Zhalilo, fellow researcher at the Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine.

Svitlana Kovalivska, deputy director for development at the Institute emphasized on the necessity of introducing project approach to the expenditure side formation and implementation of reforms which should become the basis for financing at the expense of the state budget. “When speaking about reforms in Ukraine, official authorities rather appeal to realization of provisions of law – implementation of certain laws. Nevertheless, sometimes they cannot be supported by specific results expected by people. Everyone knows the way international donors finance projects. There must be a project, its substantiation, clear project implementation period and goals achieved upon the project completion. This is the approach to be applied to financing events at the expense of the state budget,” explained Kovalivska.

Marianna Onufryk, expert on social policy at the Institute, emphasized on the necessity to change fundamental approaches of spending budget funds for the social policy goals. For instance, Onufryk believes these goals must include the following: providing for decent living standards of people, creating conditions for their well-being and improving quality of their lives. “We singled out five principles of budget policy to be followed during the budget process. I refer to the principles of equity; targeting (monetization of benefits and subsidies and introduction of “money follows a person” approach); subsidiarity (maximum closeness of services of the state to an individual – through decentralization and de-monopolization of the social sphere and delegation of powers); increasing efficiency of use of funds (reviewing number of institutions and introduction of advanced technologies, first of all, creation of unified register of all the social security beneficiaries); endurance (fulfilling its commitments by the state even in times of crisis),” elaborated the expert.

Analyzing the budget process in retrospect, Antonina Deshko, expert for financial policy at the Institute, spoke of low quality of planning and, consequently, implementation of the national budget. “Budget revenues depend not on the capacities of economy, but on the budget needs. As a result, on the hand there are plans for tax collection set for the State Fiscal Service, which exerts pressure upon business. On the other hand, there is inefficient spending of funds in the budget sector, which overstates its financing needs. For instance, substantial share of social expenses in the structure of the budget does not provide proper social protection,” said Deshko.

Anatoliy Maksiuta, Board member at the Institute, emphasized that the budget process must be transparent and the general public must take part in the discussions. “Unfortunately, it’s been three years in advance that there is no such document as principal directions of budget policy in Ukraine. This is the document to show the general public the directions the government plans to spend the budget funds, in other works, taxes collected from people. Citizens have to understand how much the government’s plans coincide with their expectations and desires. Nevertheless, in Ukraine we see the budget only after it had been approved, together with the changed tax rates. It should not be this way.  For our part, we initiate public discussion regarding principal directions of budget policy. For these purposes we conducted the research “Budget research: pragmatic approaches to strategic decisions”. We do hope both the authorities and the general public will join the discussion,” emphasized the expert.