The Ukrainian government has published the first draft of the state budget for 2022.
The parliament is scheduled to vote for it in the first reading on Oct. 20. The bill must be approved by Dec. 1, 2021.
On paper, the draft of the budget looks good: the government wants to decrease the budget deficit from 5.5% in 2021 to 3.5% in 2022. It also expects that Ukraine’s gross domestic product will accelerate its growth to 3.8% next year, while the current 10.2% inflation rate will decrease to 6.2%.
Ukraine’s revenue in 2022 is expected to increase by $6 billion to $47 billion. Expenditures are also expected to increase to $55 billion, which is $3.8 billion more than last year.
Experts said that these numbers are not clear-cut — the Ministry of Finance could change its predicted expenditures if the parliament approves the second reading of bill 5600 that would increase taxes. With this bill, Ukraine hopes to collect additional $1.1 billion in taxes by the end of the year.
Big predictions
Ukraine’s Ministry of Finance expects trade to pick up. The country imported $35.5 billion in the first half of 2021; this is expected to increase by 6.5% in the same period next year. Exports in the first half of the year added up to $37 billion; the ministry expects a 9.2% increase.
This should bring in more revenue from value-added taxes, for a total of $21 billion. In 2022, Ukraine also expects to receive more revenue from income taxes — $5 billion plus $1.7 billion from the dividends of state companies.
The minimum wage in 2022 is expected to be increased from $243 to $250, while the official average monthly salary is projected to be $571. The average salary of medical workers will grow by 56% — to $842.
The living wage in Ukraine — the amount needed to cover basic expenses such as housing, food, taxes, and healthcare — will grow to nearly $97 per month in July next year compared to $88 this year.
Priorities
According to the draft budget, the largest expenditures in 2022 will be allocated to: security and defense — $11 billion; pensions — $7.4 billion; healthcare — $7 billion; education — $6.9 billion; the Ministry of Defense — $4.9; road infrastructure — $4.6 billion.
Science and culture will receive $516 million and $505 million, respectively, in 2022.
Technology will be another priority of the Ukrainian government next year. In 2022, the government plans to spend $295 million to digitize the country compared to the $103 million it spent this year.
For example, it will allocate $63 million to prepare Ukraine for the population census, $18 million to connect rural areas to the internet and $11 million to improve tech education.
Information technology is one of the industries that depend on the approval of the new taxation bill. Without the money that it promises, the Ukrainian Ministry of Digital Transformation will receive just $228 million instead of $295 million.
The same contingency will affect construction and renovation of railways, airlines and sea vessels. If the parliament doesn’t approve bill № 5,600, Ukraine’s transport infrastructure will receive $442 million instead of the promised $603 million.
The financing of Ukraine’s struggling space industry, which lost $30 million in 2020, also depends on the bill. The industry expects to receive $112 million from the government to finance its space program, but may end up with just $41 million.
Spending on the government
Next year, Ukraine plans to reduce the budgets of state authorities. For instance, the Ministry of Finance offered to cut financing for the President’s office by 15% to $67 million. According to the draft budget, Ukraine’s parliament would receive $97 million — nearly 8% less than it got this year.
Expenditures on Ukraine’s Cabinet of Ministers would grow by 7% to $101 million. For the yet-to-be-built President’s Volodymyr Zelensky university, which will prepare specialists in cybersecurity, information technology and artificial intelligence, the Ministry of Finance offered to allocate $3.7 million.
According to the draft budget, Ukraine’s expenditures on law enforcement agencies will increase in 2022. Ukraine’s National Security and Defense Council, spearheaded by Oleksiy Danilov, can receive $11.3 million next year — 21% more than in 2021.
The Prosecutor General’s Office, Ukraine’s Security Service and the National Anti-corruption Bureau would also see more money. Ukraine’s Interior Ministry would receive $3 billion almost as much as in 2021.
Positive outlook
Ukrainian Minister of Finance Sergii Marchenko said that, if approved, the new budget will help Ukraine’s government to invest “in people, the country and the future.”
Experts praise the draft for raising spending on ecology, education and energy saving but they predict that the Ministry of Finance will revise the budget before the second reading.
“We need to follow the process of corrections: quite often all the positive aspects of the budget disappear before it reaches the parliament,” said Olexandra Betliy, an expert at the Institute for Economic Research and Policy Consulting.
